3. Determining duties and taxes
Determine the applicable tariff treatment and rate of duty
Once you have determined the correct tariff classification number, you need to establish the applicable tariff treatment that applies to your goods before you can determine the rate of duty. When viewing any chapter of the Canadian Customs Tariff Schedule, you will notice two columns on the right hand side entitled "Most-Favoured-Nation (MFN) Tariff" and "Applicable Preferential Tariffs".
Most-Favoured-Nation (MFN) Tariff
Goods originating from all countries, except North Korea, are entitled to use the rate of duty specified under this column.
Applicable Preferential Tariffs
This column lists reduced rates of duty for goods based on trade agreements including:
- North American Free Trade Agreement (NAFTA), on or before : United States Tariff (UST), Mexico Tariff (MT), Mexico-United States Tariff (MUST)
- Canada-United States-Mexico Agreement (CUSMA), on or after : United States Tariff (UST), Mexico Tariff (MXT)
- Canada-Chile Free Trade Agreement: Chile Tariff (CT)
- Canada-Israel Free Trade Agreement: Canada-Israel Agreement Tariff (CIAT)
- Canada-Costa Rica Free Trade Agreement: Costa Rica Tariff (CRT)
- Canada-European Free Trade Association Free Trade Agreement: Iceland Tariff (IT), Norway Tariff (NT), Switzerland-Liechtenstein Tariff (SLT)
- Canada-Peru Free Trade Agreement: Peru Tariff (PT)
- Canada-Colombia Free Trade Agreement: Colombia Tariff (COLT)
- Canada-Jordan Free Trade Agreement: Jordan Tariff (JT)
- Canada-Panama Free Trade Agreement: Panama Tariff (PAT)
- Canada-Honduras Free Trade Agreement: Honduras Tariff (HNT)
- Canada-Korea Free Trade Agreement: Korea Tariff (KRT)
- Canada-European Union Free Trade Agreement: Canada-European Union Tariff (CEUT)
- Canada-Ukraine Free Trade Agreement: Ukraine Tariff (UAT)
- Comprehensive and Progressive Trans-Pacific Partnership Tariff (CPTPT)
or rates of duty based on special tariff provisions such as the:
- General Preferential Tariff (GPT)
- Least Developed Country Tariff (LDCT)
- Commonwealth Caribbean Countries Tariff (CCCT)
- Australia Tariff (AUT)
- New Zealand Tariff (NZT)
The requirements of the particular trade agreement or tariff treatment must be satisfied in order to benefit from a preferential duty rate. You must possess proof of origin for the specific trade agreement at the time of importation. For example, to claim the UST you must have a valid NAFTA Certificate of Origin.
A complete list of countries eligible for the above tariff treatments can be found at the beginning of the Canadian Customs Tariff. General tariff information and guidelines can be found in Memorandum D11, General Tariff Information.
Determine if your goods are subject to the goods and services tax (GST), excise tax or excise duty
The GST (5%) is payable on most goods at the time of importation under Part IX, Division III of the Excise Tax Act.
Some importations such as prescription drugs, medical and assistive devices, basic groceries, agriculture and fishing goods are non-taxable. They are listed under Schedule VI and Schedule VII of the Excise Tax Act.
Tax exemption codes to use on the Canada Customs Coding Form B3, are listed in Memorandum D17-1-10, Coding of Customs Accounting Documents, Appendix H, List 4 (GST Status Codes) and List 7 (Excise Tax Exemption Codes). If your goods are tax exempt, you must quote the tax exemption code on your import documentation.
Examples of goods subject to excise tax include:
- Automobile air conditioners, whether separate or permanently installed ($100 per air conditioner);
- Certain vehicles designed for use as passenger vehicles; and
- Certain fuels.
Examples of goods subject to excise duty include:
- Tobacco and certain alcohol products.
Complete references are available in the Excise Tax Act or the Excise Act, 2001 or for more information on GST, excise tax or excise duty, contact the Canada Revenue Agency.
Determine the value of the goods you are importing
Now that you have established the tariff classification number and the tariff treatment of your imported goods, you need to determine their value for duty.
In most cases, the value for duty is the amount paid to the vendor for the goods. Your declaration of value for duty should be supported by a receipt or sales invoice from your vendor. This document must include a complete description of the goods, the selling price and conditions and terms of the sale. Memorandum D1-4-1, CBSA Invoice Requirements provides additional information. The value for duty must be in Canadian funds.
The Customs Act identifies six legislated methods of valuation. The method applicable to your imported goods is the first method, considered in sequential order, for which all requirements of the method can be satisfied.
For example, most goods are imported to Canada as a result of a sale for export to a purchaser in Canada. The value for duty would be based on the price paid or payable for the goods in that sale, if all the requirements of the transaction value method are met.
For more details on how to determine the value for duty of your shipments, refer to the Memoranda Series D13, Valuation.
Estimate in advance how much duty and taxes you will be required to pay
Take the value in the currency indicated on the invoice. Convert the value into Canadian dollars using the exchange rate from the date of direct shipment (the date the goods began their direct and continuous journey to a specific destination in Canada). To obtain the proper exchange rate, call the Border Information Service (BIS).
The following is an example of a calculation of customs duty and GST on imported goods with a value for currency conversion of US$100. The example exchange rate is US$1 = CAN$1.15. The goods are subject to 4% customs duty and 5% GST:
US$100 x 1.15 = CAN$115 (value for duty)
$115.00 (value for duty) x 4% (customs duty rate) = $4.60 (customs duty)
$115.00 (value for duty) + $4.60 (customs duty) = $119.60 (value for tax)
$119.60 x 5% (GST) = $5.98 (GST)
Total of customs duty and GST payable (in Canadian dollars) is $4.60 + $5.98 = $10.58
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