We have often heard Canadians interested in purchasing goods from the US ask what the total duties and taxes payable are on the item. Four elements -- (1) country of origin, (2) classification, (3) duties, and (4) taxes — determine the total charges payable by the Canadian customer.
Country of Origin
Making the correct determination for this field is of critical importance to identifying what preferential tariff applies (if any). If the product you are shipping is purchased or produced in the USA and marked "Made in USA•bCrLf you can be relatively certain that it qualifies for NAFTA and is therefore duty free upon arrival into Canada. However, if you are producing a product in the US that is composed of parts of various countries of origin, you will have to carefully follow the NAFTA rules for a change of origin.
Classification
Export codes are administered by the U.S. Census Bureau. Import codes (HTSUS) are administered by the U.S. International Trade Commission (USITC). All of the import and export codes used by the United States are based on the Harmonized Tariff System (HTS).
Duties
Once you have determined the classification you can now identify the applicable duty and taxes for your product. The Canadian harmonized tariff schedule is available at: http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html. The first two digits identify the chapter which is cited on the cover page of the tariff. Once you identify the chapter use the six digits which you obtained in the classification section above. Review the items listed in the tariff to see if your product is specifically provided for or determine the closest description.
Taxes
The final steps are to identify the applicable goods and services tax and any provincial tax. The Goods and Services Tax (GST) is 5% for all provinces and is computed by multiplying the tax rate times the shipment value + duty (in most cases). Each Canadian province may apply local taxes on top of the GST amount called Provincial Sales Taxes (PST). The following list identifies the PST percentage charged by each province: Alberta, Nunavut, NW Territories and Yukon 0%, Saskatchewan 5%, British Columbia and Manitoba 7%, Ontario 8%, New Brunswick, Nova Scotia, Labrador and Newfoundland 9%.
For example, assume you are shipping $1000 model airplanes into Vancouver B.C, Canada. These models are without a motor and having a ratio of 1 to 80, imported from China and marked "Made in China." To find the classification, enter "model airplane" into the FTD Schedule B search engine to identify the first six digits of the classification.
The next step is to search the Canadian tariff for the appropriate 10-digit number.
CUSTOMS TARIFF - SCHEDULE
The duty rate for models from China into Canada is Free under the GPT or General Preferential Tariff. The GST is 5% or $50.00 and the PST is 7% of $1,050.00 or 73.50 so total duties and taxes are $123.50. For simplicity the values are not converted to Canadian dollars — the net impact is similar.
Conclusion
So here is the bottom line. If you have a Canadian customer who wants to know if there are additional duties and taxes upon arrival in Canada you can 1) determine the origin of the item 2) determine the classification 3) determine if the item is dutiable or duty free 4) apply 5% GST and local Provincial tax amounts depending upon the destination province. This complex set of choices is why companies such as AFMS are here to help. Best wishes in your efforts to increase sales to Canada!
Helpful Links
• For more information on country of origin rules, visit http://www.worldtraderef.com/WTR_site/NAFTA/Rules_of_Origin.html
• For information regarding classification, visit http://www.census.gov/foreign-trade/schedules/b/#search for a search engine provided by the US Departmen of Commerce. It provides a six digit harmonized number used by the US Department of Commerce called the Schedule B number. The U.S. and Canada define products with a 10-digit HTS code for trade statistics.
• The Canadian harmonized tariff schedule is available at: http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html.
• If you have questions regarding duties, visit http://sbinfocanada.about.com/cs/taxinfo/a/pst1.htm
Thomas M. Stanton AFMS, LLC is an International Analyst, Licensed Customs Broker. He can be reached at 800-246-3521.
Country of Origin
Making the correct determination for this field is of critical importance to identifying what preferential tariff applies (if any). If the product you are shipping is purchased or produced in the USA and marked "Made in USA•bCrLf you can be relatively certain that it qualifies for NAFTA and is therefore duty free upon arrival into Canada. However, if you are producing a product in the US that is composed of parts of various countries of origin, you will have to carefully follow the NAFTA rules for a change of origin.
Classification
Export codes are administered by the U.S. Census Bureau. Import codes (HTSUS) are administered by the U.S. International Trade Commission (USITC). All of the import and export codes used by the United States are based on the Harmonized Tariff System (HTS).
Duties
Once you have determined the classification you can now identify the applicable duty and taxes for your product. The Canadian harmonized tariff schedule is available at: http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html. The first two digits identify the chapter which is cited on the cover page of the tariff. Once you identify the chapter use the six digits which you obtained in the classification section above. Review the items listed in the tariff to see if your product is specifically provided for or determine the closest description.
Taxes
The final steps are to identify the applicable goods and services tax and any provincial tax. The Goods and Services Tax (GST) is 5% for all provinces and is computed by multiplying the tax rate times the shipment value + duty (in most cases). Each Canadian province may apply local taxes on top of the GST amount called Provincial Sales Taxes (PST). The following list identifies the PST percentage charged by each province: Alberta, Nunavut, NW Territories and Yukon 0%, Saskatchewan 5%, British Columbia and Manitoba 7%, Ontario 8%, New Brunswick, Nova Scotia, Labrador and Newfoundland 9%.
For example, assume you are shipping $1000 model airplanes into Vancouver B.C, Canada. These models are without a motor and having a ratio of 1 to 80, imported from China and marked "Made in China." To find the classification, enter "model airplane" into the FTD Schedule B search engine to identify the first six digits of the classification.
The next step is to search the Canadian tariff for the appropriate 10-digit number.
CUSTOMS TARIFF - SCHEDULE
The duty rate for models from China into Canada is Free under the GPT or General Preferential Tariff. The GST is 5% or $50.00 and the PST is 7% of $1,050.00 or 73.50 so total duties and taxes are $123.50. For simplicity the values are not converted to Canadian dollars — the net impact is similar.
Conclusion
So here is the bottom line. If you have a Canadian customer who wants to know if there are additional duties and taxes upon arrival in Canada you can 1) determine the origin of the item 2) determine the classification 3) determine if the item is dutiable or duty free 4) apply 5% GST and local Provincial tax amounts depending upon the destination province. This complex set of choices is why companies such as AFMS are here to help. Best wishes in your efforts to increase sales to Canada!
Helpful Links
• For more information on country of origin rules, visit http://www.worldtraderef.com/WTR_site/NAFTA/Rules_of_Origin.html
• For information regarding classification, visit http://www.census.gov/foreign-trade/schedules/b/#search for a search engine provided by the US Departmen of Commerce. It provides a six digit harmonized number used by the US Department of Commerce called the Schedule B number. The U.S. and Canada define products with a 10-digit HTS code for trade statistics.
• The Canadian harmonized tariff schedule is available at: http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html.
• If you have questions regarding duties, visit http://sbinfocanada.about.com/cs/taxinfo/a/pst1.htm
Thomas M. Stanton AFMS, LLC is an International Analyst, Licensed Customs Broker. He can be reached at 800-246-3521.
