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Tariff Assessment

“Country of Origin” Markings

Penalties for Customs Non-compliance

The transaction value method, if applicable, begins with the sale price charged to the purchaser in Canada. However, the customs value is determined by considering certain statutory additions, as well as permitted deductions. For instance, selling commissions, assists, royalties, and subsequent proceeds must be added to arrive at the customs value of the goods. The value of post-importation services may be deducted from the customs value of the goods.

If the importer’s goods originate primarily from suppliers with whom the importer is related and the importer wishes to use the transaction value method of valuation, the importer is frequently requested to demonstrate that the relationship did not influence the transfer price between the importer and the vendor. In such a situation, documenta- tion may be required to establish that the transfer price was acceptable as the transac- tion value.

Canada has a self-assessment customs system. This means that importers and their authorized agents are responsible for declaring and paying customs duties on imported goods. In addition, as a result of recent changes to the Customs Act, importers are required to report any errors made in their declarations of tariff classification, valuation or origin when they have “reason to believe” that an error has been made. This obliga- tion lasts for four years following the importation of any goods. The Act imposes severe penalties for non-compliance with this and other provisions, up to Cdn.$25,000 per occurrence for listed instances for non-compliance.

In accordance with regulations made pursuant to the Customs Tariff, certain goods to be imported into Canada must be marked with their country of origin. The regulations set out a list of all imported goods that require country of origin marking. If particular goods are not included in the list, no country of origin marking is required. There are two sets of regulations that are applicable depending on the place of shipment of goods intended for importation into Canada. In the case of goods imported from a NAFTA country, the relevant regulations base the determination of origin on the basis of tariff shift rules, which are in turn dependent on the tariff classification of components and the finished product. In the case of goods imported from any country other than a NAFTA country, the country of origin is the country in which the goods were “substantially manufac- tured."

Where a person has failed to comply with the provisions of the Customs Act, the Canada Border Services Agency is authorized to take several enforcement measures, including seizures, ascertained forfeitures, or the imposition of administrative monetary penalties.

Seizures and ascertained forfeitures are applied to the more serious offenses under the Customs Act, such as intentional non-compliance, evasion of customs duties, and smuggling.

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

Copyright 2010 Visa. All rights reserved.

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