While tax treaties around the world, like NAFTA, are aimed at eliminating tariffs and duties on goods shipped across international boundaries, the world still has a way to go. There is often a tax or duty that you must pay before Canada Post, or your shipping company, will release the package sent to you from another country. And even if it’s a gift, it still has to meet certain requirements to avoid duties. We’ve summarized the main details of shipping duties so you can see what you might have to pay on that shipment you’re eagerly awaiting.
Shipping by Mail
Canada Post [Public Domain]
As the Canada Border Services Agency (CBSA) lets you know right on one of their webpages, the CBSA can examine just about any package that enters Canada by mail at their screening centres. You may get lucky, given the amount of mail that flows into Canada, but they could just as well nail your little item if you choose not to comply with their requirements. So what are those requirements? You have to list, or the person who sent you the item, has to list:
- The value of the item in Canadian dollars;
- Whether the item is a gift;
- Whether the item is subject to any exemptions.
- The way it works is, if the CBSA mail screening centre has decided your package contains an item on which duty or tax is due, you will receive your package with a Form E14, the CBSA Postal Import Form. This will outline the duty and tax you may have to pay, and pay you must to have the item released to you by Canada Post. Canada Post accepts the following forms of payment:
- Certified cheque or uncertified business cheque;
- Credit Card (Visa, Master card, or American Express);
- Commercial account with Canada Post;
- Remember to keep a copy of your Form E14 as a record and receipt.
The first exemption you need to know about concerns the value of the item. Any item below or equal to CAD$20 is not subject to duties or taxes, unless it is one of the following:
- Tobacco products;
- Intoxicating beverages;
- Publications (periodicals, magazines, and books) where the supplier is required to register under the Excise Tax Act.
Please note that the CBSA does not accept breaking shipments up into smaller amounts below CAD$20 in order to avoid duties or taxes.
If your item is a gift, then it must be valued at CAD$60 or less to be duty and tax exempt. Any gift with a value over CAD$60 will have duties and taxes assessed by the CBSA on the excess amount. Further, to qualify as a gift the item must be sent person to person, with a card or notice indicating it is a gift. The following do not qualify as gifts:
- Tobacco products;
- Intoxicating beverages;
- Advertising material or promotions;
- Items sent by a business to a consumer in Canada or vice versa.
Not a Gift
If your item is not a gift, and has a value in excess of CAD$20, then it is subject to the following duties, taxes, and charges:
- Sales taxes, including GST, HST or PST, depending on what province you are in. PST and GST are collected by the CBSA on goods entering Quebec, Manitoba, Saskatchewan, and British Columbia. HST is collected on goods entering Newfoundland and Labrador, Nova Scotia, Prince Edward Island, New Brunswick, and Ontario. Alberta has no PST, but your item may still be subject to the GST in Alberta.
- Applicable customs duties will apply in many cases. These are calculated based on the following factors:
- The item’s value in Canadian dollars;
- Whether or not it is a gift;
- Any exemptions due to treaties that may apply.
- A handling charge of CAD$9.95 per item will be applied by Canada Post on any item that is deemed to be subject to duties and taxes. If the item is duty-free and tax-exempt, then no handling charge is applied.
Canada Post Mailboxes [Public Domain]
Generally goods produced under NAFTA are exempt from duties, but do have to pay the sales tax or GST. But to ensure your item is processed quickly you need to ensure an accurate description of its value and a complete description of the item. This normally includes:
- What an item is;
- What an item is made of;
- What an item is used for;
- Remember to avoid abbreviations and to use generic names and not just trade names in describing the item.
These steps are important because if your item contains components made in a non-NAFTA country then you will face duties on the estimated value of that component. Remember that Canada, like most countries around the world, adheres to the Harmonized System of tariff codes, where each item has a specific 6 digit code pertaining to one of about 5,000 different groups of commodities, and maintained by the World Customs Organization, or WCO. Based on the harmonized system, the Canadian Customs Tariff system has about 10,000 classification 10-digit numbers. The first 6 digits are based on the harmonized system and the other 4 are specific to Canada. Go here for a detailed page explaining how the classification numbers work. Needless to say, your duty or your status as duty-exempt will depend on your classification number.
If you wish to determine whether your item is available for a reduction or waiver of tariffs, you have to fill out a NAFTA Certificate of Origin form. First, you determine if your item qualifies for preferential tariff treatment under NAFTA, after which you apply to fill out a Certificate of Origin Form. This means you are familiar with NAFTA and how its terms apply to your item. In other words, pay a consultant to do the legwork and see if you can apply for a tariff reduction. You must also make sure that your code, or classification number as it is also called, is the correct one, or you may overpay duties or not receive preferential tariff treatment to which you are eligible.
To appeal a duty or tax assessment by the CBSA you have two options:
- Check the return to customs box on the E14 form and return the item with the form to the CBSA for a review of the duties and/or taxes assessed. You do not pay the duties in this case until the assessment has been reviewed.
- Pay the amount of duties and/or taxes and submit a request for an adjustment to the CBSA. Commercial importers do this by filing a form B2 while individuals can file for a refund and/or review by following the instructions on the reverse side of their copy of form E14. Having paid the duties you get to keep the item of course.
Finally, your items may be eligible for tax relief or duty exempt status if they are temporarily imported or exported and certain conditions are met. Some examples of this are items used in:
- Tradeshows and Conventions;
- Assembly and Processing;
- For Re-export after release;
- Repair or replacement of damaged goods.