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Tariff Classification

Tariff Treatment

Tariff Calculation

The following is a discussion in greater detail of the particular steps involved in import- ing goods and the relevant laws applicable to cross-border transactions.

All goods imported into Canada are subject to the provisions of Canada’s customs laws, including the provisions of the Customs Act and the Customs Tariff. To determine the rate of duty, if any, applicable on the imported goods, the goods must be classified among the various tariff items set out in the List of Tariff Provisions of the Customs Tariff. Canada is a signatory to the Harmonized Commodity Description and Coding System, to which the United States is also a party. Therefore, tariff classifications up to the sixth digit should be identical between Canada and the United States.

Once the tariff classification of imported goods is determined, the List of Tariff Provisions indicates opposite each tariff classification the various tariff treatments available in respect of the goods, depending on their country of origin. Where no preferential tariff treatment is claimed, the Most Favored Nation (MFN) tariff treatment applies.

However, as a result of Canada’s participation in several bilateral, plurilateral and multi- lateral trade agreements in recent years, various preferential tariff treatments are avail- able to goods from certain countries. For example, all customs duties on goods originating in the U.S. have been eliminated pursuant to NAFTA.

There are similar tariff reductions in other Free Trade Agreements that Canada has entered into (e.g., with the European Free Trade Association, Chile, Costa Rica, and Israel). Moreover, the General Preferential Tariff (GPT) treatment provides partial duty relief to goods originating in certain developing countries, including China and India. To claim one of the preferential rates of duty, the importer must establish that the goods qualify for the claimed treatment pursuant to the relevant rules of origin and that proper proof of origin is obtained, usually from the exporter.

The amount of customs duties payable on any importation is a function of the rate of duty (as determined above) and the valuation of the goods. This is because most of Canada’s tariff rates are imposed on an ad valorem (or percentage) basis. In Canada, the primary method for customs valuation is the “transaction value” system, under which the value for duty is the price paid for the goods when sold for export to a pur- chaser in Canada, subject to specified adjustments. A non-resident may qualify as a “purchaser in Canada” where the non-resident imports goods for his own use and not for resale, or for resale if the non-resident has not entered into an agreement to sell the goods prior to its acquisition from the foreign seller. Otherwise, customs duties will be based on the sale price charged by the non-resident seller to the customer who is resi- dent, or who has a permanent establishment, in Canada. The transaction value method may not be available in certain other circumstances, such as where the buyer and seller do not deal at arm’s length. In such circumstances, other valuation methods will be considered in the following order: (1) transaction value of identical goods; (2) transac- tion value of similar goods; (3) deductive value; (4) computed value; and (5) residual method.

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

Copyright 2010 Visa. All rights reserved.


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