Posts Tagged ‘duty free’


 

Attn Online Shoppers, A De Minimis Increase Means More Duty-Free Importing

De Minimis Increase

Do you shop online from retailers outside of Canada? Have you ever ordered something online that arrived alongside a sizable Customs duty and tax bill? If so, then the North American Free Trade Agreement (NAFTA) renegotiation may affect you. How? The answer is in Canada’s de minimis threshold. What is the de minimis threshold and why does it matter to Canadian consumers? We have unpacked the details below.

What is De Minimis Threshold?

The de minimis level is the threshold which a package sails through the border with neither tax nor duty applied. In other words, Canada’s de minimis threshold is a duty-free threshold on imported goods.

Up to What Value Can be Imported Duty-Free Under De Minimus?

Under the Canadian Postal Imports Remission Order and Courier Imports Remission Order, the current de minimis level is $20 CDN. Therefore goods with values equal to or less than $20, would not be subject to duties or taxes upon import.

De Minimis and the NAFTA Renegotiation

The U.S. Administration released its wish list for the overhaul of NAFTA in mid-July of this year. This wish list is long with the Canadian de minimis threshold appearing high on the list.

U.S. based couriers and online merchants have been pushing hard for a de minimis level increase. They would like it to be increased from $20 to at least $200 CDN. The U.S. may likely want Canada to raise the threshold to one similar to their $800 USD level.

What is the Case for a De Minimis Increase?

De minimis is a legal maxim: de minimis non curat lex. This translates to the law does not concern itself with trivial things. In this context, de minimis regimes are intended to streamline border clearance. The rationale is that the administrative burden and processing cost does not justify collecting taxes or duties on very small shipments. In other words, if it costs more to collect the duty and tax than the amount collected then it is a financial and administrative burden to the government.

The Canadian Government currently allows goods valued at $20 to enter the country either by mail, courier, or transported by distributors without charging duty or taxes. This Canadian de minimis threshold has not changed in over 35 years. It is one of the lowest in the world. Many other countries have raised their thresholds in response to the growth of e-commerce.

Until last year the U.S. de minimis limit was $200 USD. In March 2016, U.S. President Barak Obama quadrupled the limit to $800 USD. This meant any Americans ordering from a retailer outside of the U.S. could expect any package worth less than $800 U.S. to arrive promptly without interference at the border. Neither would they receive an additional bill to cover duties and taxes and any other fees to process those duties and taxes.

All indications suggest that the Canadian consumer is on board with raising the de minimis threshold. There are many reasons why Canadians shop online, and they are no different than anywhere else in the world. They include the convenience of technology, accessibility, a wider selection of goods, targeted marketing, and sales promotions. Raising the threshold would save the Canadian consumer money they would normally pay for duties and taxes and processing fees.

What is the Case for the De Minimis Threshold to Remain Unchanged or Kept Low?

The de minimis value increase is already a hotly contested issue with retailers in Canada. Domestic retailers are concerned that a higher de minimis threshold would place them at a competitive disadvantage. This is because they would be required to levy Goods and Services Tax (GST) and Harmonized Sales Tax (HST) on the goods they sell. However, foreign retailers would not. Canadian merchants would be required to collect sales taxes on competing items sold in Canada whether in store or online and also pay duties and taxes on the imported goods.

The U.S. merchants on tax alone would have an advantage over Canadian merchants ranging from 5% in Alberta to 15% in Atlantic Canada. The Retail Council of Canada argues the U.S. online merchants would experience a 12.3% (at least) price advantage over the Canadian merchant in Canada.

The Retail Council of Canada fears that an increase in the de minimis threshold would lead to a massive increase in cross border orders with a negative impact to retailers in Canada. U.S. online merchants may start to offer free shipping as they do their U.S. customers. The investment made by retailers in Canada could be in jeopardy impacting wage jobs in IT, logistics, and distribution. The Council argues “Allocation of capital for U.S. and other international firms operating in Canada would be difficult to persuade their headquarters to invest in Canadian online offerings or bricks and mortar where customers could be easily serviced online from outside Canada.”

Some argue that the Canadian federal and provincial governments would experience a significant loss of tax and duties. The Retail Council of Canada argues that Canada and the U.S. are not on a level playing field when it comes to the acquisition of online customers. There is no tax advantage created for inbound shipments as the U.S. does not have a federal sales tax. The U.S. does not collect state and local sales taxes at the border or for interstate shipments. Also, the U.S. dominates its online retail space; with only 22% of the U.S. customers reporting to have purchased from a non-U.S. seller. By comparison, 67% of Canadians report having made online purchases in the U.S.

The recent Auditor General of Canada Report concluded that the Canadian federal government is spending more money collecting duties and taxes on shipments than those duties and taxes are worth. Simply put the government spends two dollars to collect one dollar.

The C.D. Howe Institute released a report in 2016 stating the Federal Government would save $161 million per year by raising the de minimis threshold to at least $200. The report also stated there would be a net positive benefit to Canadian consumers, governments, and businesses combined of $648 million. The C.D. Howe Institute is an independent nonprofit research institute in Canada. They are considered one of Canada’s influential think tanks on essential economic policy.

What Happens Next?

Canadian consumers appear to be on board with raising the de minimis threshold. According to the Nanos Research Poll, 76% want it raised to at least $200. Thousands have also signed a petition organized by the Canadian American Business Council pushing for change.

What will the Federal Liberal Government do? Well, we will have to wait and see for when NAFTA renegotiations conclude.

Do you have a questions or comments regarding Canada’s de minimis threshold? Share them in the comment section below and I will be happy to respond.

 

 

 

 

 

 

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U.S. Made Goods Returned – Not Always Duty Free

Stamp: Made in USA
Goods manufactured in the United States that have been previously exported and are now returning require a formal declaration called American Goods Returned (AGR) also referred to as U.S. made Goods Returned (USGR).

Common mistake made by importers

Do not assume that the return of goods to the United States will be without some difficulty. A common mistake that importers make when declaring U.S. goods is that they do not know where the products were manufactured. Just because the product was purchased in the United States it doesn’t necessarily mean it was manufactured in the United States.

U.S. Goods Returning are usually eligible for duty-free status

All goods are subject to duty every time they enter the U.S. unless they are specifically identified as duty exempt. Did you know U.S. goods returning to the United States are usually eligible for duty-free treatment? The provision 9801.00.10 in the Harmonized Tariff Schedule allows U.S. made products to return to the U.S. without being subject to duty and the Merchandise Processing Fee. However, the provision stipulates the goods cannot be advanced in value or the condition of the goods improved while abroad.

Example 1: U.S. Manufactured Helicopter Sent to Canada for Repairs

For example, say you are the owner of a helicopter manufactured in the USA. The helicopter has electrical problems and you send it to a repair shop in Canada. When the helicopter returns the value of the repairs may be subject to duty.

American Goods Returned - Example 1

 

Example 2: Canadian Company Purchases Goods from the U.S.

American Goods Returned - Example 2

Another example would be goods purchased from the U.S. by a Canadian company. They received their shipment and the goods were refused by the buyer because they did not meet their product specifications. The goods can be returned to the U.S. duty free if the proper documentation can be supplied to U.S. customs.

 

Documentation required for U.S. Goods Returning duty free:

The most common proof is a Manufacturer’s Affidavit. Like the name implies, this form is completed by the actual manufacturer of the goods. U.S. customs requires this for any shipments that are valued over $2500 and if the articles are not clearly marked with the name and address of the manufacturer.

The affidavit must:

  • State that the goods are a product of the USA
  • Be on the U.S. manufacturer’s letterhead and
  • Signed by an employee from the U.S. manufacturers facility that has the authority to sign on behalf of the company.

As supporting proof of U.S. Goods returning, U.S. Customs also requires:

  • Foreign Shipper’s Declaration and
  • Declaration by Owner, Consignee or Agent

At some U.S. ports of entry, Customs will accept a NAFTA Certificate that is completed by the manufacturer.

Next time you get ready to ship U.S. goods remember it is not always as easy as it seems. Be sure to supply the proper paperwork to support your duty free return!

 

Do you have questions about U.S. Goods Returning? Drop us a comment or question below or email us at Ask Your Broker.

 

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Video: Importing U.S. Goods Returning

Goods manufactured in the United States that have been previously exported and are now returning require a formal declaration called American Goods Returned (AGR) also referred to as U.S. made goods returned (USGR).

In this video, Aimee Miller, explains when an American Good Returned is eligible for duty-free treatment and the documents that are required.

 

 

Do you have questions about U.S. Goods Returning? Drop us a comment or question below or email  Ask Your Broker.

 

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Importing Antiques into Canada Duty-Free

 

antiquebooks_glassesDid you know – Articles (other than spirits or wines) produced more than 50 years prior to the date of accounting (the date the goods clear Customs) are duty free?

How do I take advantage of duty free status?

Articles produced more than 50, but less than 100 years ago:

  • Annex Code (9989) covers articles (other than an age exceeding 100 years, spirits or wines) produced more than 50 years prior to the date the goods clear Customs.
  • You must indicate the year in the description of the goods.
  • Articles over 50 years old (up to 100 years old) are to be classified using their regular tariff classification, followed by the use Annex Code 9989 – This will make those goods duty free.

Articles produced more than 100 years ago:

  • These articles are considered antiques and tariff (9706.00.00.10) is to be used for antique furniture or tariff (9706.00.00.90) for antiques other than furniture.
  • Tariff (9706.00) does not apply to the other articles of chapter 97.
  • You must also indicate the year in the description of the goods and they are to be classified in their own tariff of chapter 97. (i.e. original paintings, original sculptures and engravings, collections of minerals, botanicals etc.).

For more information on duty-free treatment for antiques, please contact Pacific Customs Brokers.

Have questions about duty on personal and commercial imports of antiques? Leave them for us in our comments section below or email Ask Your Broker.

 

 

Claiming Duty-Free on Canadian Goods Returned: Same Condition

Do any of these scenarios sound familiar:

  1. Your Canadian company sells a product to the U.S., and the U.S. company for some reason needs or wants to return the item because the product is the wrong color, or wrong size, too many or you simply changed your mind.
  2. Or maybe you are sending items to the U.S. temporarily for loan, demonstration, or promotional purposes.
  3. Yet another scenario might be that you brought paintings from Canada to your new vacation home in Palm Springs. After 5 years you sell your condo in Palm Springs and return to Canada and want to bring the paintings back with you.

In any of the above or other similar scenarios wherein you are importing previously exported goods back into Canada in the same condition, you could qualify for a duty free return.

To re-import returned goods in the same condition into Canada duty-free:

  • proof of export must be on file, and
  • duty drawback or relief must not have been granted

Documentation Requirements:

Businesses are required to substantiate their claim for relief of duty and/or excise taxes by providing documents that prove that the goods in question originated from Canada (for example: Proof of Export).  The term “originated from Canada” refers to both domestic products and to previously imported, duty-paid products returning to Canada. GST is also relieved as long as the goods exported, are re-imported by the same party.

The commercial documents must describe the goods in sufficient detail to enable Canada Border Services Agency (CBSA) officers to verify that the goods exported were the same as the goods returning to Canada. The claimant can add to these commercial documents, any other information useful to the officer such as make, model, serial number, reason for export, and nature of the export.

It is highly recommended to note on your customs invoice (for goods returning in the same condition):

‘The goods mentioned on this invoice were exported from Canada during the month of _____________ in the year _________, the goods were not advanced in value or improved in condition (e.g. altered, processed or repaired) when they were out of the country, and no refund, drawback or exemption of customs duties and/or taxes has been granted or will be claimed.’

Proof of Export:

Almost any reasonable form of proof is acceptable to the CBSA as evidence. However, it should be noted that failure to present any conclusive proof may result in denial of relief of duties and/or taxes. The description of the goods on the bill of lading or similar document must be the same as on the import invoice. Also, evidence that the goods have not been advanced in value or improved in condition by any process of manufacture or other means, or combined with any other article abroad. An affidavit is not an acceptable proof of export.

A form E15 can be used to prove export or destruction. The CBSA must examine a shipment prior to its export and certify a form E15, Certificate of Destruction/Exportation.

In cases where there are high-volume exports and returns, please consult with our trade compliance professionals to find an alternate process.

If goods are returning after being stored in a duty deferral program (bonded warehouse or duties relief), they must be either duty-paid or re-entered into duty deferral upon their return.

All records pertaining to the origin, classification and valuation of import entries must be kept on file for 6 years following importation.

 

Do you have questions or comments regarding  Canadian Goods Returning into Canada? Leave them in our comments section below or email Ask Your Broker.