Are You Eligible To Request Remission Of Canada’s New U.S. Surtaxes?


Surtax | Canadian Cash

Surtax Got Your Profits Down? You May Be Eligible For A Surtax Remission.

Many Canadian Importers of Record have experienced an increase in importation costs on items originating from the U.S. that appear on the surtax list. The surtax of 10% to 25% on a wide range of items, including steel and aluminum, was imposed on July 1st, 2018, in retaliation to the U.S. decision to increase tariffs on Canadian steel and aluminum imports into their country. There is a possibility that you could be relieved or refunded of the surtaxes you are currently paying.

Under What Circumstances Will You Be Relieved Or Refunded Your Surtax Paid?

The Federal Interdepartmental Committee may recommend to the Minister of Finance to grant relief under “exceptional and compelling circumstances that outweigh the primary rationale behind the application of duties and, in the current case, surtax.”

They continue with a list of three situations where a refund or relief may be applied:

  1. To address situations of short supply in the domestic market, either on a national or regional basis.
  2. Where there are contractual requirements existing prior to May 31, 2018, for Canadian businesses to use U.S. steel or aluminum in their products or projects.
  3. To address, on a case-by-case basis, other exceptional circumstances that could have severe adverse effects on the Canadian economy.


If you need assistance applying for a refund or possible relief of the surtaxes please
contact one of our expert Trade Advisors. With all of the pertinent import history details, they can help you write and apply for remission of surtax on your behalf.

To date, no timeline has been provided to let us know how long this review process will take. However, we will continue to provide you with details on the possibility of refund or relief as they develop. To ensure you do not miss any updates please subscribe to our mailing list.

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How The Proposed Tariffs Affect You In The U.S.-China Trade War


China U.S. Trade War Proposed Tariffs

For the second time in July the U.S. government has placed additional tariffs on products exported from China and imported into the U.S.  If the proposed tariffs were actioned, there would be changes for both American and Canadian importers. How will the additional tariffs on Chinese manufactured goods affect trade between the United States and Canada?

The Proposed Tariffs Effect On Canadians

Canada is already in the midst of a trade war with the U.S.  Now Canada is unwittingly affected by the trade war between the U.S. and China because many items proposed for additional tariffs are manufactured in China, exported to Canada and then finally exported into the U.S.  The additional tariffs levied against Chinese goods are applicable to goods manufactured in China without regard to the previous country of export.

Canada has enjoyed a long standing trade partnership with the U.S.  Canadian companies often act as Non-Resident Importers; handling all of the import requirements including payment of duties and taxes. This has allowed Canadians to sell their goods to companies in the U.S. as seamlessly as a U.S. company. This allows Canadian exporters to expand their market beyond the Canadian border.

The third list of tariffs released on July 11th cover consumer goods such as furniture, seafood, automobile parts, televisions and video equipment, which we see our clients from Canada ship on a daily basis.

Even though the trade war is between the U.S. and China, other countries are affected because they, like the U.S., have their goods manufactured in China.

Many of the items on the proposed list such as furniture and seafood, which are normally duty free, will be dutiable at 10% if the proposed tariffs are actioned.

If you are a Canadian company who exports Chinese manufactured products into the U.S. you will need to consider how you will address the increase in cost of exporting to Americans.

The Proposed Tariffs Effect On Americans

Over 75% of the new tariffs target machinery for manufacturing goods, electrical equipment, televisions, recorders, bicycles, bicycle parts, and automobile parts: all merchandise which is in high demand with american consumers. With the U.S. being a consumer based economy, where the consumer is interested in paying the lowest price possible, this new legislation would have an adverse effect on the U.S. economy.

In short order, the increase in costs to bring goods into the U.S. will increase costs for producers, importers and ultimately the consumer. This is never a popular solution, however the U.S. has tried to entice China to come to the table to discuss revising their unfair trade practices.  

The additional tariffs were initiated to combat Chinese regulations that require companies wishing to do business in China partner with a chinese company and share the technology associated with their products leading to violations of both intellectual property rights and World Trade Organization (WTO) rules.

Some economists say that a more appropriate way to combat these unfair trade practices would be to band together with other countries and take their concerns to the WTO to initiate a lawsuit against China.

In the long run, if the two countries can come to a satisfactory solution to the root of the issue the U.S. will benefit greatly and the trade deficit will balance out.

The Proposed Tariffs Affect On U.S. Import Bonds

How will the increased duties affect your import bond? Bond limits are set based on duties, taxes and fees paid in a 12 month period. With the increased duties, higher bond limits may be required. In addition to the higher bond limits, the surety company may request financial documents and collateral to secure the bond.

Your Guide To The Proposed Tariffs

This is a retaliatory move by the U.S. to address concerns of intellectual property rights.

The United States Trade Representative (USTR) will be holding a hearing August 20th-23rd on the impact the proposed tariffs will have if imposed. In order to appear at the hearing, submission must be made before July 27th, which must include a summary of the expected testimony. Written comments can be submitted to the USTR from now until August 17th, 2018.

A decision on if the additional 10% tariff will be imposed or not is expected to be announced at the end of August, after the hearings.

This 10% will be in addition to the already imposed 25% tariff on $34 billion worth of goods from China that came into effect on July 6th, 2018. China retaliates with a reciprocal tariff increase on U.S. commodities imported into China.

How You Can Prepare For The Proposed Tariffs

As a business it is best for you to be proactive in your approach to the impending changes. Contacting a trade professionals for advice on how the proposed legislation could affect your company will provide you with the knowledge to make quick decisions when change inevitably comes.

This includes understanding;

  • What country has the most cost effective solution to source your materials from,
  • Determining your rate of duty if there were changes to the proposed tariffs or NAFTA,
  • Education to make yourself prepared for current practices and future changes, as well as,
  • Freight costs to get your products from your source to you.

All of these services are provided to you by our Trade Advisory experts in Canada and the U.S. Contact us to start a conversation with a Trade Advisor today.

 

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Alert to Carriers: U.S. Customs and Border Protection “Changes to the In-Bond Process”


Carriers Highway Sunset

U.S. Customs and Border Protection (CBP) published a final rule entitled “Changes to the In-Bond Process”, which incorporated several proposed amendments to the CBP regulations for shipments traveling in-bond.

Key Changes To The In-Bond Process

  • The paper form of the 7512 form for truck shipments traveling in-bond through the United States from Canada has been eliminated.  All in-bond applications will need to be filed electronically by the carrier or their authorized agent.
  • The maximum standard transit time between ports for truck shipments of in-bond merchandise will be 30 days.
  • Carriers will be required to request and receive permission electronically from CBP before diverting in-bond merchandise from its intended destination port to another port.
  • Carriers will be required to report the arrival and location of the in-bond merchandise within 48 hours of arrival at the port of destination or port of exportation.
  • Additional information on the in-bond application will include the six-digit harmonized tariff number if available.

Key Dates Of The Changes

July 2, 2018

The electronic filing of all new in-bond transactions will be the responsibility of the Carrier or their agent.  The paper form 7512 will not longer be accepted for input into ACE by CBP.

August 6, 2018

Mandatory electronic reporting of the arrival and export functions will be the responsibility of the carrier. In addition, Carriers will be required to electronically report diversion to a port other than the original port of destination .  The bonded cargo location will be required to be reported electronically in the form of firms code. ACE edits will be in place to reject arrival in this is not provided.

No Date Set

No date has been set for the implementation of the provision requiring the six digit harmonized tariff number.

How Do Carriers Meet These New Compliance Measurements?

Carriers can electronically file their in-bond applications, arrivals and export reporting, and diversion request through their ACE secure data portal.  If you do not have an ACE portal account you can find more information on how to secure one by clicking here.

How You Can Get Assistance To File Your Electronic In-Bond Data

If the carrier does not have an ACE portal account and does not want to obtain one, PCB can file the electronic in-bond data for you.  The carrier will need to contact us to get an account established, including a customs power of attorney to allow us to conduct customs business on behalf of your company.

The carrier is responsible for submitting the information regarding arrival, export or diversion requests to us for timely submission to U.S. Customs.

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Canada Announces Commodities Affected By Retaliatory Surtax


Retaliatory Surtax AnnouncedOn June 29, 2018, Foreign Affairs Minister Chrystia Freeland announced which products will receive retaliatory tariffs (also referred to as surtax) upon importation into Canada.

There are three lists of products, the first will receive a 25% tariff and the other two 10% and will remain in place until the U.S. removes the tariffs on Canadian steel and aluminum imports.
 
The finalized list was created after consultation with the Canadian business community most affected by these additional tariffs.

Which Products Will the Surtax be Imposed on?

The lists of commodities affected appears in the three tables published by the Department of Finance Canada and includes many steel, aluminum and other products including coffee, ballpoint pens, and ketchup.

What Products are Considered Originating from the U.S.A?

The surtax will only be applied to goods that appear in these three tables and are considered originating from the U.S. in accordance with the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations.

How is the Surtax Calculated?

According to the Canada Border Services Agency (CBSA), the surtax is calculated on the Value for Duty and if in addition to the duty rate:

Where the item is duty-free

“The value for duty (VFD) of an imported good subject to a surtax is $150 CAD. The imported good has a Most Favoured Nation (MFN) duty rate of zero percent. The applicable surtax is 10 percent, as per the Schedule to the United States Surtax Order (Other Goods).
The amount of surtax is calculated as follows: $150 (VFD) x 0.10 (per cent surtax) = $15 (surtax payable)” Source

Where the item has duty

“The same imported good is subject to an MFN duty rate of 8 percent.
The amount of customs duties is calculated as follows: $150 (VFD) x 0.08 (rate of Customs duty) = $12 (Customs duties payable)
The amount of surtax is calculated as follows:
$150 (VFD) x 0.10 (per cent surtax) = $15 (surtax payable)” Source

Are There Any Exemptions?

The surtax will NOT be applied to some headings of Chapter 98 of the Customs Tariff including:
  • 98.01 Conveyances or containers of Chapters 86, 87, 88 or 89, engaged in the international commercial transportation of goods or passengers 
  • 98.02 Conveyances temporarily imported by a resident of Canada for international non-commercial transportation 
  • 98.03 Conveyances and baggage temporarily imported by non-residents 
  • 98.04 (other than tariff item No. 9804.30.00) Travellers’ exemptions 
  • 98.05 Goods imported by a former resident of Canada returning to Canada to resume residence
The surtax takes effect July 1st, 2018 and will be applied to all products listed in the three tables originating from the U.S. However, if the goods can be proven to be in-transit before July 1st, they will not have the surtax imposed upon importation. Proof of date of direct shipment must be provided in the form of sales or purchase orders, bills of lading, report of entry and cargo control documents.
 
If you need assistance or guidance with commodities affected by the new surtax, please contact us to speak with a trade advisor for expert advice.
 
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Is Duty And Surtax The Same Thing?


Duty and Surtax
 
Many consumers and importers are confused with the current discussion on duty and surtax being imposed on goods imported or exported.
 
An import duty is a tax collected on imports by a country’s customs authority. It is based on the value, the classification, and origin of the goods in the tariff administered by the importing country.
 
Import duty has been referred to as a customs duty, a tariff, an import tax, and an import tariff. All these names apply to the same thing: duty. However surtax is different.
 
To make the differentiation between the two, you must first understand duty as it relates to the Country of origin and Free Trade Agreements.

How Country of Origin Determines Duty

Rates of duty can differ depending on where the goods were made and that specific country’s trade relation status with the country from where the goods are being imported. As an example, Canada has many trade agreements with other countries which would affect the tariff or duty applied to specific goods imported into Canada, such as the North American Free Trade Agreement (NAFTA).
 
Generally, there is a rate for a developed country and a special rate for a non-developed country.

What is a Surtax?

Surtax is an additional duty or extra duty applied to goods that are already dutiable.  Surtax in Canada is imposed by an Order in Council, which sets out the amount of the surtax, the goods to which it will apply, and normally a duration.
 
The Canadian government provides a Notice of Intent and or a Notification of the surtax. The notification will identify the rate of the surtax, the goods which the surtax will apply, and the period that the surtax will be collected.  When the period of the surtax is extended beyond the period specified in the Order in Council, the Canadian Government will issue a Notice.

Proposed Surtax Announced May 31, 2018

On May 31, 2018, the U.S. announced the imposition of surtaxes on imports of certain steel and aluminum products from Canada (at the rates of 25% and 10%, respectively).
 
In response, Canada issued a Notice of Intent to impose a surtax on imports of steel, aluminum, and other products from the U.S. Canada announced that the surtax will take effect July 1, 2018, and will remain in place until the U.S. eliminates its trade measures against Canada.  The surtax will only apply to goods originating from the U.S.

Will NAFTA Eligible Goods Receive the Surtax?

Yes, provided they are on the list of commodities that the surtax will be applied to. This would mean NAFTA eligible goods will remain duty-free, however, they will be subject to the surtax amount.

Will Commodities Eligible for Duty Elimination be Required to Pay the Surtax?

Commodities listed in Chapters 98 and 99 of the Customs Tariff will have the surtax applied upon importation into Canada.
 
As you can see, many products currently receiving the benefit of duty-free importation into Canada will be subject to the surtax. As the surtax has been proposed on a wide variety of commodities, it is essential to your operations that you understand how your import costs will be affected.
 
You should determine if they will increase, negotiate with your vendors and seek out alternative sourcing options. Plan A is ideal, but a good Plan B can help you stay ahead of surtax.
 
  • *If your imported goods are on the proposed list of commodities that may be subject to surtax come July 1st
  • *Alternative options for materials sourcing (alternative countries where you may take advantage of preferential duty rates or Free Trade Agreements)
  • Freight rates from your alternative origins
*Charges may apply.
Jan Brock | Author
 
 
 
 
 
 
 
 
 
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