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DUTY DRAWBACK UPDATE

DUTY DRAWBACK AN IMPORTANT OPTION IN CURRENT TRADE WAR

Since we last wrote about duty drawback, there have been significant developments in the trade war between Canada and the United States (“US”).  Canada has enacted three rounds of retaliatory tariffs, while the US has also imposed a number of different tariffs, with the most recent being President Trump’s reciprocal tariffs.

Amid this escalating trade war with no end in sight, businesses should consider duty drawback as a mechanism to mitigate the impact of tariffs and obtain legal advice to determine eligibility.

Why Do I Care about Duty Drawback?

In a nutshell, duty drawback (“drawback”) enables importing businesses to apply for a refund of duties already paid on goods imported and subsequently exported from Canada.

Canada's drawback program is overseen by the Canada Border Services Agency ("CBSA") and is available to importers, exporters and manufacturers that use imported goods. There is also a relief program with similar eligibility requirements, the Duties Relief Program, which is available for importers seeking relief from duties before importing goods into Canada that are destined for export.

In a Canada vs. the US Trade War, Drawback can Help!

Canada currently has three rounds of retaliatory tariffs in effect targeting billions worth of US goods: United States Surtax Order (2025-1); United States Surtax Order (Steel and Aluminum 2025), and; United States Surtax Order (Motor Vehicles 2025). 

Fortunately, the CBSA has confirmed in Customs Notices 25-10, 25-11, and 25-15 that drawback remains available for all three rounds of Canada’s retaliatory tariffs.  In addition to the general eligibility requirements for drawback, which we have previously written about here, there are also a number of specific rules and restrictions laid out in the Canada-United States-Mexico Agreement (“CUSMA”) that may serve to limit the amount of duties refundable.

In a change of position from earlier executive orders, drawback is also available for President Trump’s reciprocal tariffs, as confirmed by US Customs and Border Protection on April 4, 2025.

Application Process

If qualifying, importers must generally submit drawback applications within 4 years from the time goods enter Canada.  Applications must also be submitted in a prescribed form, with supporting documentation establishing that the goods qualify for drawback. 

Drawback applications will necessarily involve issues like properly valuing the inputs and related party claims to the same goods (which would require a waiver process).  Experienced International Trade Counsel can help in this process, while also maximizing the opportunity for recoveries.

Takeaways

With three rounds of Canadian retaliatory tariffs in effect causing financial stress for Canadian business, Canada's duty drawback program may provide some needed relief.  Importers looking to take advantage of this important program should seek out legal advice from experienced International Trade Counsel, who can help determine eligibility and maximize success. 

For help with Canadian Duty Drawback, click here.

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