#

How do Your Tariff Classifications Measure Up?

From the Auditor General’s Audit Report on Customs Duties Management by the CBSA, Global Affairs & Finance Canada-March 3, 2017:

  • Non-compliance is occurring due to CBSA controls not working.  Descriptions of goods are incorrect or of poor quality. As a result it is difficult to determine exactly what is imported.

The video of the Auditor General’s report to the Standing committee on Public Accounts is available via the link below:

PACP Meeting No. 78

In light of the above finding and the reduction in duties collected by CBSA as a result of Free Trade Agreements and/or reduction in duties, it is expected that CBSA will rely more heavily on Verification Audits to determine if Importers are using correct Tariff Classifications.  Should an audit determine that the Tariff Classification being used is incorrect; the Importer may be subject to AMPs Penalties.

CBSA updated their Verification Priorities in January 2018.  These can be found at the following website:

https://www.cbsa-asfc.gc.ca/import/verification/menu-eng.html

 

What does this mean for the Importer?

Should an Importer be identified for a classification audit, the goods being reviewed will be subject to scrutiny to determine the correct Tariff Classification.

Are the tariff classifications that you are using being correctly applied? Have they been determined in accordance with the General Interpretive Rules and Canadian Rules as set out in the Tariff Schedule and for legal purposes has the classification been determined according to the terms of the Heading and any relative Section or Chapter Notes? These are the questions that must be answered in order to establish that you have correctly applied the correct classification number and the corresponding duty rate.

There are many situations where the tariff classification of a product due to its composition and features and overall complexity may appear to fall under more than one tariff classification with varying duty rates. These should be carefully evaluated to ensure that you are not paying more than you should be and equally important that there is not the possibility that another classification with a higher duty rate exists which may be discovered during a subsequent customs verification audit.

Wherever there are questionable classifications these should be thoroughly reviewed to ensure that the classification applied is correct, consistent and legally defensible to maintain your compliance responsibilities and to avoid unnecessary customs reviews. If the classification of the product being considered cannot be clearly determined by reference to the relative Headings, Section and Chapter Notes, or the Explanatory Notes, then you should consider obtaining an Advance Ruling from the Canada Border Services Agency (CBSA). This will afford you the protection against a potential audit and avoid the possibility of future reassessments for duty.

Even when an Advance Ruling is obtained there may still be differing opinions as to the correct classification of the article due to different interpretations of the relevant authorities. Advance Rulings may be appealed but generally such appeals are affirmed in favour of the original CBSA determination unless compelling reasons are presented that would overturn that decision. This leaves only one further avenue of appeal open to you which is an appeal to the Canadian Import Trade Tribunal (CITT).

 

CITT Decision Demonstrates the Complexities of Tariff Classification

A 2011 decision by the CITT illustrates the decision process in determining the correct tariff classification for a particular good where the CBSA had taken one position and the importer another position based on their respective interpretation of the regulatory provisions. It also shows that even among the professionals the tariff classification of goods is not always straight-forward or obvious and that a full comprehension of all the terms and conditions of a tariff classification are required in order to come to a successful conclusion.

The Canadian Tire Corporation (CTC) in an appeal (CITT Appeal No. AP-2011-024) contested the classification of “ratchet tie-downs” which the CBSA had determined as being classified under tariff item 6307.90.99 as other made-up articles of other textile materials (with an MFN duty rate of 18%) and for which CTC claimed under tariff item 8205.70.90 as other vices, clamps and the like (with an MFN duty rate of 6.5%). The ratchet tie-downs consisted of a textile strap, plastic-coated steel hooks and a ratchet handle. The goods operated by attaching the steel hooks to an anchor point and wrapping the textile strap around the load or articles to be held or transported. The strap is then drawn tightly by the ratchet handle creating tension to constrict or press the load or article to the anchor points to hold them firmly in place.

 

CBSA Position

  • 82.05 restricted to hand tools for working in the hand
  • Goods are similar to webbing carrier straps that are expressly provided for in 63.07
  • Goods don’t meet the definition of the word clamp
  • Goods don’t have a working edge/surface/other working part of base metal
  • Goods can’t be used independently in the hand
  • Textile straps give the good its essential character and the ratchet buckle is of secondary importance and the working part is the strap
  • Precedent CITT decision cited for similar goods under 63.07

CTC Position

  • 82.05 not restricted to hand tools but also includes clamps and goods “like” clamps
  • 63.07 restricted to goods not more specifically described elsewhere in the Tariff
  • Metal ratchet is the essential component and also its working part of base metal
  • Goods do meet the definition of clamp under its ordinary and common usage
  • Goods are more specifically covered by the terms of 82.05 rather than under 63.07
  • Precedent cited although for similar goods did not refer to application of heading 82.05 and therefore not of relevance to this issue

CITT Position

  • 82.05 is not restricted to hand tools and does include clamps and goods “like” clamps
  • Ratchet is the essential character of the good, without which the goods would not work and also constitutes the working part of base metal
  • Goods are more specifically described as vices, clamps and the like under 82.05 rather than as other made-up articles of other textile materials under 63.07
  • As terms of heading 82.05 more specific, the goods are not properly classified in heading 63.07
  • Precedent cited by CBSA did not address the issue of 82.05 making it different from present case (CITT also stated it was not bound by its own precedents)
  • The goods are classifiable under tariff item 8205.70.90

The above information presents only the salient points that were made by each party to support the tariff classification determination that was ultimately made in favour of CTC in this instance.

However, to fully appreciate and understand the arguments as presented, direct reference should also be made to the CITT website under Appeal No. AP-2011-024, to view the various authorities cited in this case that determined the correct tariff classification in this appeal.

This case should provide you with some idea of the complexities that may be encountered when contemplating the tariff classification for a good and the factors that must be considered in order to arrive at the correct classification determination.

 

What We Can Do To Help

We offer support to review your database to advise on classification that may cause an issue should you receive an audit.

If you receive an Audit Notification, please contact the Consulting Department before submitting anything to CBSA.  We can review the documentation to identify possible errors or verify correct Tariff Classifications.

If you have goods being imported under questionable classifications, or you receive an audit notification or would like a review of your Tariff Classifications; contact our Consulting Department at Thompson Ahern International.

As the Broker, we need you- the Importer- to understand and classify your products correctly. We need to know your goods almost as well as you do.  We can meet via video conference to discuss your database with the goal of verifying tariff classification. Contact us to set up a meeting.

 

Martha Kirby

Manager,
Consulting and Compliance
T-905 678-5490
E-mkirby@taco.ca

 

GST Direct Importers Online Pay

Dear Client:

As a part of the ARL (Accounts Receivable ledger) initiative by CBSA, importers are now required to pay their monthly SOA (k84) online through the bill payment option available through the following banks.

Below are the confirmed names that appear on their commercial internet banking sites:

BMO
The name appears as CANADA BORDER SERVICES AGENCY on the BMO website. Since Telus has developed this for BMO, Citibank, Bank of America and Tangerine, they are all using the same payee database and will see the same name.

RBC
The name appears as CBSA Duties, Taxes and Fees on the RBC website.

TD
The name appears as CBSA DUTIES TAXES FEES on the TD website.

Scotiabank
The name appears as CBSA DUTIES TAXES FEES on the Scotiabank website.

National Bank
The name appears as CANADA BORDER SERVICES AGENCY or AGENCE DES SERVICES

FRONTALIERS DU CANADA on the National Bank website.

CIBC
The name appears as  CBSA CUSTOMERS/ASFC DOUANES  on the CIBC website.

HSBC
The Payee name is ‘CBSA Importer / Importateur de L’ASFC’.

You do have the option of sending Thompson Ahern an EFT/wire transfer and having the payment issued by us to CBSA on your behalf.

Please advise  us when you register for  direct payment, as we are required to keep a list to send CBSA for any exceptions.

If you have any question please contact Ruki Martinesz @ 905-678-5475 or by e-mail rmartinesz@taco.ca

Important Notice for the New ARL Payment Policy

Effective  January 2018 CBSA ARL unit have made several significant changes to the way  they want to receive payments from Importers and Customs Brokers.

CBSA will only accept payment by cheque with a valid reason (i.e. you financial institution doesn't support  "bill payment" to CBSA). If you bank with one of these financial institutions please make arrangements to send an EFT/Wire to Thompson Ahern who will issue payment on your behalf, since as of the February payment, Thompson Ahern will no longer be sending GST cheques to CBSA in Ottawa on behalf of clients.

If for a valid business reason you choose to pay by cheque, "GST DIRECT" Importers whose Receiver General payment is over $5,000.00 must be paid by "Certified cheque".  Importers with their own" Security Bond " with Receiver General payment amounts over $50,000.00 must be paid by certified cheque.

The payment must be in the hands of CBSA (Ottawa) by 4pm on the last business day.

You should send your cheque by the deadline to:

CBSA
333 North River Road

Place Vanier Tower A Ground Floor Room 1018
Ottawa, ON K1A 0L8

For those of you who send us payments via wire transfer please ensure we receive it 2 days prior to the due date to meet new timelines enforced by CBSA.

Please work with us to ensure we meet these new guidelines and avoid any potential penalties that CBSA may start to enforce. Thank you and we appreciate your support in this new push by CBSA to have all transactions done electronically.

Any questions or concerns kindly contact

Ruki Martinesz, C.C.S.
Controller
Thompson Ahern International
Direct: 905-678-5475
Fax: 905-677-3584

CETA Origin Declaration – UPDATE

CBSA has advised that they have received confirmation from the EU that the Member States in the CETA group will accept the wording European Union for "EU" and CA or CAN for "Canada".

Therefore, the following indications are acceptable for the completion of field 3 of the origin declaration :

  1. Canada
  2. CA
  3. CAN
  4. EU
  5. European Union
  6. Canada/EU (or their short/long form versions)
  7. CM (for products that originate in whole or in part in Ceuta of Melilla)

CETA – Origin Verification by CBSA

The CSCB has once again asked CBSA about the requirement for an exporter in the EU to be registered in the REX program, this time in the event of an audit. Although CBSA maintains that they do not require exporters in the EU to register in the REX program, they have provided the following responses to additional questions on this subject.

CSCB

1. Can EU authorities determine that an exporter’s shipments to Canada do not qualify for the benefits of CETA, based solely on the fact that the exporter never registered for the REX program?

CBSA

1. Yes, the EU authorities administration of the REX program falls within their jurisdiction. Therefore, it is conceivable that the EU might consider the origin declaration of an exporter that does not have an REX number, and who is legally required to have obtained an REX number, to be invalid and consider the goods covered by that declaration as not entitled to the CETA preference.

CSCB

2. If so, can CBSA still accept the CETA tariff treatment for the importation into Canada for an unregistered EU exporter, even if EU customs determines that the goods don’t qualify because of the REX number missing on the origin declaration?

CBSA

2. The CBSA will accept claims for CETA preferential tariff treatment based on an origin declaration that contains either an REX number and/or a signature. It is possible, however, where a good has been selected for an origin verification, and it is discovered by the EU member state that the REX number is invalid or incorrect, or that the exporter is not in compliance with the REX program, that it could impact the conduct of the origin verification by the customs administration of the EU member state, and therefore, affect the originating status of the good.

12 December 2017

Canada's CEOs Warn Government on Trade Policy -- Update

By Paul Vieira Published December 14, 2017

OTTAWA –  Canada's most prominent business leaders are "deeply concerned" by setbacks to diversify trade in Asia in the face of uncertainty over the North American Free Trade Agreement, according to a letter their lobbyist sent to Finance Minister Bill Morneau.

The Business Council of Canada, which represents chief executives from 150 of the country's largest corporations, said in a letter dated Dec. 13 the economy is due to underperform after a strong 2017. It attributes the anticipated slowdown to a decline in business investment, as companies fret over the outcome of Nafta talks, and "fears that trade disruptions will damage regional value chains."

The Wall Street Journal reviewed the contents of the letter, which are meant to offer a wish list of what CEOs would like the government to address when crafting the 2018 budget plan. The business council is led by John Manley, Canada's former foreign and finance minister under Liberal prime minister Jean Chretien.

The letter's most pointed language deals with trade, as the council expressed concern about recent events in Asia.

Eleven Pacific-Rim countries failed to come to an agreement in principle on a revised version of the Trans-Pacific Partnership without the U.S., due to disagreements from Canada, especially on the auto-sector front. This month, Canadian Prime Minister Justin Trudeau went to Beijing, but didn't, as widely expected, announce the formal launch of negotiations toward a free-trade pact with China. China watchers say the Chinese leadership weren't keen on Mr. Trudeau's push for a "progressive" trade deal that incorporated the environment and labor rights.

"We are deeply concerned by the government's recent failure to reach an agreement in principle on" the TPP, the letter said. "Canada should be a leader in opening markets around the world."

A representative for Mr. Morneau wasn't immediately available to comment on the letter.

Mr. Trudeau defended his government's approach to trade this week. "It's not about signing any deal, it's about signing a good deal for Canadians, " Mr. Trudeau told lawmakers during a spirited question-period session. "We know that no deal is better than a bad deal."

Researchers from the Peterson Institute for International Economics, a Washington-based think tank that favors free trade, said the TPP pact, even without U.S. participation, could generate income gains of $157 billion annually for its members by 2030, "mainly by increasing trade in machinery and agricultural products as well as through higher levels of investment."

On China, the CEO group called on Canada to "redouble efforts" to forge a closer economic relationship with the world's second-biggest economy.

As for Nafta, the business council said it is "essential to safeguard Canada's longstanding preferential trade and investment relationships with the U.S. and Mexico." The letter doesn't offer advice on how to deal with the most contentious issues so far in Nafta negotiations, such as rules governing U.S. content in motor vehicles and the dispute-resolution process.

Uncertainty over Nafta is one reason the Bank of Canada has cited in adopting a more cautious approach on rate-policy making after two rate rises earlier in 2017. Talks to revamp Nafta have hit a stalemate, with U.S. Trade Representative decrying a "lack of headway" from Canada and Mexico on addressing the Trump administration's main concerns.

The next round of Nafta talks are scheduled in January in Montreal, and trade observers believe they could be a make-or-break moment for the continental trade pact.

Meanwhile, the letter also warned Mr. Morneau that Canada's attractiveness as an investment destination has deteriorated over the last half decade, due to a series of tax and regulatory changes. It added that weakness could be exacerbated once the Trump administration's tax-reform measures kick in. House and Senate Republicans agreed to a final bill Wednesday that envisages $1.4 trillion in tax relief over a decade.

CETA and the Registered Exporter

As a result of questions regarding requirements for completion of the CETA Origin Declaration in the EU, the CSCB contacted the European Commission. Today, we received the following response from the Directorate General for Trade.

In the EU, the REX system is applied since 1 January 2017 for the Generalized System of Preferences (GSP), whose rules of origin are laid down in Commission Delegated Regulation (EU) 2015/2446 and in Commission Implementing Regulation (EU) 2015/2447 of the Union Customs Code (Regulation (EU) No 952/2013). Progressively, the REX system will also be used for certifying the origin in preferential trade agreements. The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada will be the first. It is important to note that there is a difference between the requirements for making out a statement of origin in the EU and in Canada. The EU legal requirements obliges the EU exporters to be registered in REX for consignments of above €6000 and to use the REX number in the statement of origin, in order to export, even if the Canadian requirements for claiming preferences do not require this. Also, while it is true that for shipments with a value below €6 000 no registration in REX is required; we encourage all EU exporters to register, in case they would use bigger value shipments in the future.

As regards origin declaration, CETA is based on the self-certification therefore to qualify for preferential duty rates upon importation the exporter, be it European or Canadian, needs to fill in an origin declaration. A statement on origin is a declaration of origin added by the registered exporter on an invoice or any other commercial document. Text of Origin Declaration in different languages can be found in Annex 2 of the CETA Protocol on Rules of Origin.

Furthermore, the Commission has also launched an updated version of the Market Access Database (MADB) which contains CETA specific practical information for businesses to trade with Canada, including practicalities as regards Rules of Origin and Certification. We will continue enriching this database with more practical information on trading opportunities under CETA; in this regard we welcome your feedback and comments for improvement.

Please follow this link to access the relevant MADB page:
http://madb.europa.eu/madb/fta_canada_content.htm#rulesoforigin

CETA Origin Declarations and Electronic Signatures

CETA Origin Declarations and Electronic Signatures
Post date: 2017-11-14


Question:

Are CETA origin declarations with an electronic signature accepted by CBSA?

Answer:

CBSA has advised that the provisions in Article 19, paragraph 7 of the CETA are consistent with their current administration for the electronic transmission of origin declarations.

This article reads as follows:

7. The Parties may allow the establishment of a system that permits an origin declaration to be submitted electronically and directly from the exporter in the territory of a Party to an importer in the territory of the other Party, including the replacement of the exporter's signature on the origin declaration with an electronic signature or identification code.

CBSA has also included the relevant parts of Memorandum D11-4-14 Certification of Origin Under Free Trade Agreements dealing with certificates of origin in electronic format.

Certificates of Origin in Electronic Format

5. The CBSA acknowledges certificates of origin in electronic format as an acceptable means of certifying the origin of goods. This allows importers to receive and maintain certificates of origin electronically and to transmit those certificates of origin by e-mail to the CBSA, upon request.

6. Acceptable formats for electronic certificates of origin include:
(a) scanned certificates of origin – The exporter may scan a completed and signed certificate of origin for electronic transmission to the importer;

(b) certificates of origin with Power of Attorney – The exporter provides the importer with vested power of attorney, thereby authorizing the importer to complete the certificate of origin for the goods. Under this option, the importer must be able to prove to the satisfaction of the CBSA that he/she has the legal authority to complete and sign the certificate of origin; and

(c) e-certificates of origin – The CBSA acknowledges an electronic representation of a cursive signature, or an alternative to the cursive signature, as an acceptable means to certifying the origin of goods. For example, an alternative could be a series of numbers that represents the exporter's signature. As no one is required to physically sign the document under this option, the certificate of origin can be both created and transmitted electronically, thereby enabling an entirely paperless process. It should be noted that e-certificates of origin must contain all of the prescribed data elements and statements, however they do not necessarily need to mirror the prescribed certificate of origin in terms of their layout and manner in which the data elements and statements are presented. Lastly, the importer is fully responsible for ensuring the secure transmission of e-certificates of origin to the CBSA.

7. The decision rests with the importer claiming preferential tariff treatment on the basis of that certificate or statement of origin, to determine whether or not he/she is willing to accept an official document provided by the exporter in an electronic format and/or featuring an electronic representation of a cursive signature, rather than an original document and/or signature.


8. As well, the onus rests with the exporter to ensure that the electronic signature that is used in certifying origin is adequately controlled, with limited delegation to subordinates, and is used only in respect of goods where the authorized user has sufficient knowledge of their origin.