Canadian Government has started a Duty Drawback program tor Canadian exporters and manufacturer to ensure that they stay competitive in international markets. Under this program, Canadian exporters and manufacturer are offered refund of customs duties paid for imported goods that are ultimately exported, or deemed exported, whether or not the goods are further manufactured in the country. Drawbacks can also be given when imported goods go beyond their natural shelf life, become obsolete, or become surplus. In these cases, the goods must be destroyed by order of a Canada Border Services Agency (CBSA) officer. You can temporarily use a motor vehicle in Canada before you export it without affecting your eligibility for a drawback. 

The CBSA may give you a full or partial refund when you file your claim. When the Agency partially refunds a claim, it will pay you any balance owing after your claim is verified. Should you not receive a full refund within 90 days of submission, the CBSA will pay interest on any balance owed to you. Goods and Services Tax /Harmonized Sales Tax (GST/ HST) cannot be refunded by drawback .Before a claim may be filed, the goods must be exported, or deemed exported or destroyed.. Requests for refunds must be submitted within four (4) years of the original date of importation. Goods, other than fuel or plant equipment, consumed or expended in the direct manufacture of other goods which are subsequently exported from Canada, may be eligible for drawback. A waiver is required from all other eligible claimants waiving their rights to claim a drawback. A claim will not be accepted if the required waivers are required but not included. The Drawback Program has the same advantages as the Duties Relief Program. The only difference is that the Drawback Program is for people who have already paid the duties and are asking for a drawback (refund) of those duties as authorized under the Customs Tariff.

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In case of claiming drawback on NAFTA non-originating goods used as materials in the manufacture of products exported to a NAFTA country (United States or Mexico), a “Lesser of the two Duties” concept to determine the amount of duty drawback is used. Under this method, companies must establish two duty amounts:

 

(a) the amount of customs duties paid or owed on imported goods entering Canada;

(b) the amount of customs duties paid on the goods entering the other NAFTA country.

For exported goods affected by the limitations, drawback, or relief of customs duties cannot exceed:

(a) the lesser of the total amount of customs duties paid or owed on the goods imported into Canada; and

(b) the total amount of customs duties paid on the exported good in the NAFTA country where the good was imported.

What we can do for you?

  • Our team of experts can review your duty recovery processes and recommend an efficient duty drawback system to maximize your future returns.
  • Our experts can help you prepare your case for claiming all of the duties you paid on your imported inputs during last four years for re-export as is or for manufacturing of other goods which are subsequently exported from Canada. 
  • We can also help you in refunding all your duties and taxes levied on your non- commercial importations brought into Canada by mail, by courier or hand carried.
  • In case your drawback refund is denied by the customs authorities we can help you prepare your case for filing your appeal for that decision.
  • Besides getting drawback refund on imported inputs, we can also process your case for drawback on goods (other than fuel or plant uipment) consumed or expended in the direct manufacture of other goods and are then exported to other countries.
  • We can help in preparing and obtaining your waiver certificate for filing drawback claim.
  • If you are planning to apply for duty drawback for NAFTA non-originating goods used as materials in the manufacture of products exported to a NAFTA country, (USA or Mexico), we can help you in applying NAFTA “Lesser of the two Duties” concept, to determine the amount of customs duties you can claim.
  • We can also help you in collecting drawback on NAFTA non-originating goods by collecting five data elements required to satisfy the “Satisfactory Evidence” of the customs duties paid on the exported good entering another NAFTA country.

What is Duty Drawback?

Drawback is a refund of customs duties paid for imported goods. You qualify for duty drawback when:

  • You import goods that are later exported as-is; 
  • You import goods to produce other goods for export; or
  • You destroy imported goods that are obsolete or surplus, or that are manufactured into an item that is obsolete or surplus.
  • You destroy imported goods that are obsolete or surplus, or that are manufactured into an item that is obsolete or surplus.
  • You purchasing a vehicle with a plan to export.

How different from Duty Relief Program?

The Drawback Program has the same advantages as the Duties Relief Program. The only difference is that the Drawback Program is for people who have already paid the duties and are asking for a drawback (refund) of those duties as authorized under the Customs Tariff.

How to Apply?

Complete Form K32, Drawback Claim, to apply for a drawback and submit it, together with supporting documentation, to the nearest Canada Border Services Agency (CBSA) office.

Non-commercial Imports    

An importer may request a refund of duties and taxes paid on non-commercial importations using Form B2G, CBSA Informal Adjustment Request. Non-commercial or casual goods are defined as goods imported for individual use, and not intended for resale, commercial, industrial, occupational, institutional, or other like use. The Casual Refund Program manages the refund and adjustment processes for duties and taxes levied on non- commercial importations brought into Canada by mail, by courier or hand carried. The Program also allows for the reimbursement of duties and taxes paid, upon presentation of evidence that the imported casual goods have been returned to the sender.

Supporting Documents    

The original accounting document showing the amount of duties and taxes paid at the time of importation must be attached to Form B2G. Documents supporting the request for a refund or adjustment must also be attached to Form B2G. The accounting document required is dependent upon the method of importation: for travellers’ importations attach Form BSF715 (formerly form B15); postal importations attach Form E14; and courier importations attach the courier receipt that includes the B3 transaction number.

Time Limit    

Requests for refunds must be submitted within four (4) years of the original date of importation. However, when claiming the benefits of preferential tariff treatment under the North American Free Trade Agreement (NAFTA) or in case of original importation for traveller and postal redeterminations of tariff classification, value and/or origin, requests for refunds must be made within one (1) year of the date of importation.

Misc. Points

  1. Refunds may not be claimed in respect of penalties imposed on imported goods.
  2. The CRCs do not issue refunds of other government department (OGD) fees or penalties
  3. Goods and Services Tax /Harmonized Sales Tax (GST/ HST) cannot be refunded by drawback
  4. Before a claim may be filed, the goods must be exported, or deemed exported
  5. The CBSA will strive to process casual refunds within 30-business days of receipt of the B2G package and all requisite supporting documentation.

Interest payments    

Interest at the prescribed rate will be granted for the period beginning on the 91st day after the day the application for refund is received and ending on the day the refund is granted. Any person who receives a drawback of duties other than those levied under SIMA, shall receive, in addition to the drawback, interest at the prescribed rate, starting on the ninety-first day after the application for the drawback is received by the CBSA, and ending on the day the drawback is granted. However, no interest will be paid on any refunded amount of provincial sales taxes, tobacco taxes, and alcohol mark-ups/levies.

Insufficient duties and taxes    

Where importers find that insufficient duties and taxes were assessed on their non-commercial postal, courier, or traveller declarations, an adjustment to the original assessment may be submitted on Form B2G

Credits    

The Casual Refund Electronic Data Interchange Transaction System (CREDITS) is an electronic process allowing customs brokers to represent a foreign sales company and electronically submit refund claims on behalf of the importer

Waiver Certificate: A waiver is required from all other eligible claimants waiving their rights to claim a drawback. A claim will not be accepted if the required waivers are required but not included.

Equivalence    

Goods, other than fuel or plant equipment, consumed or expended in the direct manufacture of other goods which are subsequently exported from Canada, may be eligible for drawback. Equivalence can only be applied to goods which are further manufactured, including “consumable” or “expendable” goods. “Equivalence” is the term used in cases where both imported and domestic goods of the same class are used interchangeably in the processing of end products, some of which are exported.  In order for domestic and imported textile fabrics composed of different fibres to be considered equivalent for purposes of a drawback, the fabrics must be made from fibres that fall within the same class, as listed in subsection 11(2) of the Goods Imported and Exported Refund and Drawback Regulations. Fabrics composed of fibres of different classes will be considered equivalent only if they meet the weight requirements of the regulations.

Scrap or Waste    

Scrap or waste resulting from a processing operation can normally be included in a claim. However, the scrap or waste cannot be claimed if similar scrap or waste would be subject to duty if it were imported and the scrap or waste has a merchantable (sales) value. If the scrap has a sales value and would be subject to duty if it were imported as such, it can only be claimed on a drawback if the scrap is exported. Otherwise, the claim must be reduced by the amount of duty that would be applicable to the sales value of the scrap.

NAFTA Restrictions    

Article 303 of NAFTA places limits on the amount of customs duties and anti-dumping and countervailing duties – Special Import Measures Act (SIMA) duties – refundable by way of drawback or deferrable under the Duties Relief Program for goods exported from one NAFTA country to another. Article 303 of NAFTA does not affect GST relief, GST deferral, or GST Input Tax Credit refund processes.

Restrictions on Non-originating Goods    

NAFTA affects most non-originating goods used as materials in the manufacture of products exported to a NAFTA country (United States or Mexico).Under the NAFTA “Lesser of the two Duties” concept , to determine the amount of customs duties subject to claim under the Drawback Program or under the Duties Relief Program, companies must establish two duty amounts:

(a) the amount of customs duties paid or owed on imported goods entering Canada;

(b) the amount of customs duties paid on the goods entering the other NAFTA country.

For exported goods affected by the limitations, drawback, or relief of customs duties cannot exceed:

(a) the lesser of the total amount of customs duties paid or owed on the goods imported into Canada; and

(b) the total amount of customs duties paid on the exported good in the NAFTA country where the good was imported..

The duties paid on the goods entering the other NAFTA country must be determined from that country’s customs documentation and be converted to Canadian dollars. For goods subject to the NAFTA restrictions, SIMA duties may not be claimed via drawback. SIMA duties deferred on entry into Canada must be paid within 60 days following the date of export of the goods.

Goods Not Affected by the NAFTA Limitations

The NAFTA limitations for drawback and duties relief do not apply to NAFTA originating goods .The changes do not affect goods meeting the following criteria (i.e. full drawback may be obtained or full deferral of duties is allowed):

(a) goods exported in the same condition as imported;

(b) goods originating in a NAFTA country;

(c) goods exported to non-NAFTA countries;

(d) goods deemed exported by way of:

(e) delivery to a duty-free shop, ships’ stores or supplies for ships and aircraft,

(f)  delivery  for use in joint undertakings of two or more of the NAFTA countries that will subsequently become the property of the country into whose territory the good was deemed to be exported.

(e) orange or grapefruit concentrates used in the production of orange or grapefruit products exported to the United States;

(f)  imported goods (or substituted by an identical or similar good) used as a material in the production of: quilted cotton piece goods, quilted man-made piece goods, furniture moving pads or imported good used as a material in the production of, or substituted by an identical or similar good used as a material in the production of, apparel that is subject to the MFN rate of duty when exported to the territory of the United States

Same Condition Processes

NAFTA allows full drawback or deferral of customs duties on goods exported in the same condition in which they were imported. Imported goods may undergo certain operations in Canada and still be considered to be exported in the same condition. Clients may write to the regional Trade Operations Division offices requesting advice on whether or not specific goods may be considered “same condition” for the purposes of Article 303 of NAFTA.

Deemed Exports

A drawback may be paid or deferral allowed in respect of goods deemed exported. This applies to all goods whether or not the actual export will be to a NAFTA country. Certain deemed exports are not affected by the NAFTA restriction, (for example, sales to duty-free shops, goods delivered as ships’ stores or supplies for ships and aircraft, and joint undertakings between two or more NAFTA countries). Where a drawback is paid or customs duties are deferred on goods deemed exported because they were delivered to a Customs Bonded Warehouse and such goods are later exported to a NAFTA country, the amount of drawback paid or customs duties deferred may be subject to a NAFTA restriction.

Requesting for Advice

Clients may write to the regional Trade Operations Division offices requesting advice on whether or not specific goods may be considered “same condition” for the purposes of Article 303 of NAFTA. For goods subject to the NAFTA limitations, exporters must pay any customs duty owing within 60 days of the date of export to the NAFTA country. The amount owing must be established using the “lesser of the two duties.” SIMA duties must be repaid in full.

Satisfactory Evidence

NAFTA affected good must obtain “Satisfactory Evidence” of the customs duties paid on the exported good entering another NAFTA country. This information may be in the form of a copy of a foreign customs accounting document, a foreign customs accounting adjustment document, an affidavit, or other documentation as approved by the Trade Compliance Division. Satisfactory evidence information must contain all the following five data elements:

(a) foreign import entry number,

(b) date of importation,

(c) tariff classification number,

(d) rate of duty, and

(e) amount of duties paid.

The five data elements may also be supplied in affidavit form. The affidavit may be completed by a drawback claimant or duties relief participant based on information supplied by the importer/customer in the NAFTA country where the goods were exported.

Time Limit

A drawback claim may be made for qualified goods that have entered a foreign NAFTA country under a duty deferral program and are subsequently imported into the territory of a country. Claims must be filed within four years of the release date of the goods entering the commerce of Canada.

Goods entering a foreign NAFTA duty deferral program and subsequently re-exported to a non-NAFTA country are not subject to the NAFTA restriction on duty drawback and duties relief. Documentation must be provided that both establishes the disposition of the goods from the time of export from Canada and establishes their export to the non-NAFTA country.

Interest Payment

Should the outstanding amount be customs duties and the amount is not paid within 60 days after the exportation date, interest will be assessed at the specified rate. Interest will begin on the 61st day after the exportation date and will end on the day the outstanding amount has been paid in full.

Examples:

This example illustrates a simple calculation for a single imported material. In this example Canadian and US dollars are at par.

Drawback-1

Duty paid on non-originating material imported into Canada: CAN$9.00
Duty paid on manufactured product imported into the United States: CAN$6.00
Duty eligible by way of drawback: CAN$6.00

Drawback-2

Full drawback allowed on Material A (NAFTA originating): CAN$3.00
Material B (Non-originating) (CAN$6) is compared to the Canadian equivalent US duties paid (CAN$9)
The lesser of the two amounts is: CAN$6.00
Drawback of duties allowed is $3 (NAFTA originating) plus $6 (“lesser of the two duties”) for a total of: CAN$9.00

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