Canadian Government has started a Duty Relief program tor Canadian exporters and manufacturer to ensure that they stay competitive in international markets. The Duties Relief Program relieves you from having to pay duties on imported goods if you will eventually re-export the goods either in the same condition or after using, consuming or expending them to process other goods.

Importers are being offered relieves on the payment of duties, at the time of importation, on imported goods that will eventually be exported either in the same condition or after being consumed, expended or used in the processing of other goods. In most cases, the goods must be exported within four years from the time they arrive in Canada. The CBSA will check that imported goods are eventually exported. Your company can sell or transfer imported goods before they are exported, as long as the new owner is also a Duties Relief Program participant. You will transfer all liability, such as paying duties and reporting non-compliance, to the new owner. The amount of relief becomes payable once the goods no longer qualify for this program, i.e., are no longer for export.

Imported goods, for export from Canada which are for:

(a) further processing;

(b) display or demonstration in Canada;

(c) development or production in Canada of goods for subsequent export; or

(d) export without having been used in Canada for any purpose other than indicated in subparagraphs (a), (b), or (c);

may qualify for relief at the time of importation. In most cases, this means there is no payment of customs duties, anti-dumping and countervailing duties, or excise taxes, other than the Goods and Services Tax/Harmonized Sales Tax (GST/HST), at the time of importation, as long as the goods are for export. Relief of the duties or taxes levied or imposed under the Excise Act 2001, the Excise Tax Act or section 20 of the Customs Tariff may not be granted under duties relief on tobacco products or designated goods. The amount of relief becomes payable once the goods no longer qualify for this program, i.e., are no longer for export.

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 relief is used. Under this method, companies must establish two duty amounts:

(a) the amount of customs duties  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 relief of customs duties cannot exceed:

(a) the lesser of the total amount of customs duties 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 can we do for you?

  • Our experts can process your case to register you for duty relief program and prepare to necessary documents for filing your claims for any duty you paid on your imports or exports.
  • Besides getting drawback refund on imported inputs, we can also process your case for drawback on goods (other than fuel or plant equipment) consumed or expended in the direct manufacture of other goods and are then exported to other countries.
  • If you are planning to apply for duty relief for NAFTA customs duties paid on the exported good while entering another 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 duty 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.
  • In case your duty relief or refund is denied by the customs authorities we can help you prepare your case for filing your appeal for that decision.

What is Duty Relief Program ?

Under this program, Canadian exporters and manufacturer are offered relieves on the payment of duties, at the time of importation, on imported goods that will eventually be exported either in the same condition or after being consumed, expended or used in the processing of other goods.

Consumable and Expendable Goods

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.

Same Condition Processes

NAFTA allows full 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.

Transfer of Goods

 Your company can sell or transfer imported goods before they are exported, as long as the new owner is also a Duties Relief Program participant. You will transfer all liability, such as paying duties and reporting non-compliance, to the new owner.

Deemed Exports

 A 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 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 customs duties deferred may be subject to a NAFTA restriction.

NAFTA Limitation

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 customs duties deferrable under the Duties Relief Program . Under this method, companies must establish two duty amounts:

(a) the amount of customs duties 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 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.

How to Apply?

Complete Form K90, Duties Relief Application

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 duties relief participant based on information supplied by the importer/customer in the NAFTA country where the goods were exported.

Who may Apply?

This program is for businesses who:

  • (a)import goods into Canada; or
  • (b)receive goods that were imported into Canada; and
  • (c)export those goods from Canada;
  • and want to relieve the payment of duties at the time of importation.

Imported goods, for export from Canada which are for:

(a) further processing;

(b) display or demonstration in Canada;

(c) development or production in Canada of goods for subsequent export; or

(d) export without having been used in Canada for any purpose other than indicated in sub paragraphs (a), (b), or (c);

may qualify for relief at the time of importation. In most cases, this means there is no payment of customs duties, anti-dumping and countervailing duties, or excise taxes, other than the Goods and Services Tax/Harmonized Sales Tax (GST/HST), at the time of importation, as long as the goods are for export. Relief of the duties or taxes levied or imposed under the Excise Act 2001 and the Excise Tax Act 2001  or section 20 of the Customs Tariff may not be granted under duties relief on tobacco products or designated goods. The amount of relief becomes payable once the goods no longer qualify for this program, i.e., are no longer for export.

GST/HST

Although the GST/HST is not relieved under the Duties Relief Program, the GST/HST payable is reduced by the amount of duty remitted (based on the new value for tax).

Application Process

Participation in the Duties Relief Program requires the completion and Canada Border Services Agency (CBSA) approval of Form K90, Duties Relief Application. The CBSA will review the completed application and schedule a visit to the company premises to confirm adequate control records are in place to track the imported goods while they remain in Canada.

Program User Procedure

If authorized by CBSA, a unique license number will be issued. When importing goods under this program, the license number must to be placed in field No. 26, “Special Authority” of Form B3-3, Canada Customs Coding Form. . When using the license number on the B3-3, the company retains responsibility for the goods until:

(a) the goods are transferred to another Duties Relief Program participant;

(b) the goods are exported from Canada;

(c) the amount relieved is paid when the goods are no longer for export;

(d) the goods are reclassified to an eligible duty-free status;

(e) the goods are transferred to another relief program; or

(f) the goods qualify for destruction under the Refund of Duties on Obsolete or Surplus Goods Regulations.

Time Period

The imported goods must be exported from Canada within four years, or within five years in the case of imported spirits used to manufacture distilled spirits, of the date of release of the goods.

Transfer of Goods

When goods imported under the Duties Relief Program are sold or transferred to another program participant, the liability for the payment of any duty owing transfers to the participant who receives the goods. Transferring the duty liability is documented by means of either Form K32A, Certificate of Importation, Sale, or Transfer, or other commercial documentation.

Deemed Exportation

Subsection 89(3) of the Customs Tariff identifies goods deemed to be exported. This means the goods may not have physically left Canada, but are considered to have been exported.

Consumable & Expendable Goods

Goods, other than fuel or plant equipment, that are consumed or expended in the direct manufacture of goods that are for export from Canada are eligible for duties relief. Consumables are goods that virtually disappear in the manufacturing process and do not form part of the finished product. Expendables are goods that, after use, retain some physical characteristics but have become useless or devitalized and do not form part of the finished product.

Equivalence

Equivalence is a term used in duties relief where both imported and domestic goods of the same class are used interchangeably in the manufacture of end products, some of which are exported. The imported goods must be in sufficient quantities to produce the goods exported and be used in production prior to the domestic goods. The imported goods must be used in the different manufacturing facilities producing the exported products. The finished product, when incorporating domestic goods, must be exported within two years of the imported goods’ release date. Equivalence can only be applied to goods that are further manufactured, including consumable or expendable goods. In order to consider domestic and imported textile fabrics composed of different fibres equivalent for duties relief purposes, the fabrics must be made from fibres that fall within the same class, as listed in Section 10(2) of the Duties Relief Regulations. Where the fabrics are composed of fibres of different classes, they will only be considered equivalent if they meet the weight requirements of the regulations.

Scrap or Waste

Scrap or waste resulting from a processing operation is also eligible for relief under this program when the imported goods are processed and exported. However, if the scrap or waste is dutiable if imported and has a merchantable value, it is not entitled to the relief, unless the scrap is exported. In this case, the duties applicable to the scrap must be paid. The rate of duty in effect on the date the scrap or waste was produced, is applicable.

Non-Qualifying Use

When the imported goods no longer qualify for duties relief, submit Form B2, Canada Customs – Adjustment Request, and voluntarily pay the duties owing. Examples of non-qualifying use include, but are not limited to

(a) a sale in Canada; or

(b) goods that are no longer for export.

Sanctions

Instances of non-compliance with the requirements of the Duties Relief Program will result in a demand for payment of any outstanding duties owing and may result in the possible removal from the program and the assessment of a penalty under the Administrative Monetary Penalty System (AMPS). Payments of duties for failing to comply with a condition of the program must be received by the CBSA within 90 days from the date the goods no longer qualified

Special Notes

Where goods entered under the duty deferral program are affected by the “lesser of two duties”, a participant is allowed 60 days from the date of export of the goods to obtain satisfactory evidence and pay the duties even though any duties deferred are payable immediately upon export.

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