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Chapter 7: customs laws and procedures

Authored by: Navin Joneja, Blake, Cassels & Graydon LLP

Introduction

Importing and selling goods into Canada can be a fruitful venture for many companies. However, this exercise is best accompanied by an understanding of Canadian customs laws and procedures and other border measures. In this chapter, we provide some background on these particular laws and how they operate, as well as a discussion of the potential benefits offered by Canada’s various trade agreements and how to take advantage of these. The following topics will be covered:

Sub-topics:

  • Importing goods into Canada

  • Tariff classification

  • Tariff treatment

  • Tariff calculation

  • Tariff assessment

  • Country of origin markings

  • Penalties for customs non-compliance

  • Voluntary disclosure

  • Border security and transport

  • Import and export controls

Importing Goods into Canada

In Canada, the federal government regulates the importation of goods. Canadian customs law is founded on two principal statutes: the Customs Tariff and the Customs Act. The Customs Tariff imposes duties on imported goods. The Customs Act sets out the procedures that importers must follow when importing goods and specifies how customs duties payable on imported goods are to be calculated and remitted to the relevant governmental authority.

Under the North American Free Trade Agreement (NAFTA) to which the United States, Canada and Mexico are signatories, barriers to trade in goods between these three countries have largely been removed. Tariffs between Canada and the United States have generally been eliminated since January 1, 1998. In the case of Mexico, tariffs on most goods were eliminated by January 1, 2003.

In order for goods to be eligible to take advantage of NAFTA, they must satisfy certain “rules of origin,” which require a certain level of North American value-addition. These sophisticated rules are based on changes in tariff classification and/or regional value content, the latter being calculated by either transaction value or the net cost method. Goods that do not meet these requirements will remain subject to Canadian, U.S. or Mexican tariffs. Foreign-owned Canadian companies can take full advantage of the liberalized rules, as their application does not depend on the ownership of the business. In the case of services, the provisions of NAFTA are generally open to enterprises of other NAFTA members, even if controlled by non-NAFTA nationals, so long as the enter- prise has some substantive business activities (i.e., is not merely a shell).

Visa e-commerce cross-border handbook for U.S. retailers

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