4 Things To Know When Recovering Customs Duty Drawbacks

When examining your inbound and outbound logistics process for cost savings, are you considering any possibilities from Customs duty drawbacks?

Opportunity For Canadian Companies

As a Canadian importer, this opportunity may be available if you import dutiable merchandise into Canada where the goods are subsequently exported. NAFTA has virtually eliminated almost all customs duties for goods imported from the U.S. or Mexico, therefore duty drawback has the greatest benefit for Canadian companies importing from overseas suppliers.

Primarily this would occur in situations which we would call "same condition duty drawback". In other words, the goods that are imported into Canada are then exported in the same condition.

What To Consider

1. The Process For Filing A Duty Drawback

Unlike the process for importing goods, where a customs B3 entry must be submitted for each shipment, a duty drawback claim to the Canada Border Services Agency (CBSA) can be filed which covers multiple imports or exports. This is good news for potential claimants who may observe that the administrative costs for filing a drawback for an individual import or export surpass the benefits of any duty recovery. The claimant is able to file on a periodic basis to minimize these costs and make the drawback process a worthwhile exercise.

2. Various Parties Can Be The Claimant

In order to claim a duty drawback, the Canadian exporter does not have to be the same company as the Canadian importer, or vice versa. With appropriate approvals, there are provisions which allow one company to waive their right to the drawback so the other party is able to make the claim. If you are involved with a situation where the Canadian duty forms a substantial percentage of the merchandise value (for example footwear or clothing where the duty rate could be 16-18%), this topic should be closely scrutinized to avoid an inflated selling price which could make the final foreign sale uncompetitive.

3. Time Limits For Filing

If you have neglected duty drawbacks, there is some more good news for you. The time limit for filing your drawback claim with Canada Border Services Agency is four years from the date the goods were released when originally imported (five years for distilled spirits).

4. Other Customs Levies Are Also Eligible For Recovery

In addition to regular Customs' duties, the claimant can also recover levies such as anti-dump duty, countervailing duty, and excise taxes.

There are also provisions for duty drawback for materials imported into Canada (and subsequently exported) when the materials were further processed or used during the Canadian manufacturing process. If you feel that you have a possible situation, it would be best to speak to a trade advisor to determine if it qualifies for this program.