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Canada custom duty

Customs Duty and Online shopping for Christmas – most popular gifts 2011

According to Statistics Canada, in Canada, 13.4 million online orders were made by over 2.2 million households. By 2007, the Internet was used to make almost 70 million orders by about 8.4 million Canadian individuals. By 2009, Canadians used the Internet to place orders for goods and services valued at $15.1 billion, up from $12.8 billion in 2007. Considering the recession

The most common types of online orders are travel services, entertainment products such as concert tickets, books and magazines; and clothing, jewelry and accessories. According to the website creditcardscanada.com in 2009, the breakdown in percentages for online shoppers who purchase goods and services is as follows:

49% Travel

40% Entertainment

35% Reading Material

33% Apparel and Jewelry

26% Music

22% Software

With the advent of deal sites like Groupon, I’m sure this has altered the landscape a bit but the big 6 are probably still the bulk of the popular items being purchased. So with this in mind, I thought it would be useful for Canadians and residents of Canada to understand how much they would be paying in Customs duty and taxes if they some did some online shopping for Christmas gifts.

With the Canadian dollar near par with US dollar, many products are considerable cheaper south of the border. However, most people are unable to figure out how much they would actually save without knowing how much duties, taxes, brokerage and shipping feeds will be. Once you know all these costs, it is easy to determine if there really is a deal to be had.

In a nut shell, in the simplest terms, customs duties are calculated based on the commodity or HS (Harmonized System) Code and tariff treatment applied…and there are a myriad of commodity codes in the Customs Tariff. As such, without knowing the exact details of a commodity it is impossible to make a determination. As such I have decided to take the top ten items gifted on Amazon.com and figure out how much the duty and taxes would be if sent to Canada.

Please note that the following classification and rates of duty I am providing on specific goods are solely that of my opinion and not sanctioned by the CBSA in an way.

For the purposes of this article we will be assuming the following:

*That Customs Clearance is going to be handled by a courier company for an average $20 charge per type of commodity…and the

*Exchange rate will be the rate used today (day of this writing this article) November 17th 2011 of $1 USD = $1.0206 CAD.

*Keep in my mind that Provincial sales tax is dependent on your province of residence/destination. I.e. Ontario – HST of 13% is calculated on the purchase price plus any customs duty; while in Alberta no provincial sales tax applies so only GST will be charged on the purchase price.

1. Electronics for Kids – The number 1 gift in this category is the LeapFrog LeapPad Explorer Learning Tablet $156.99 USD or 160.22 CAD. This item is great for kids. I myself have been handing my kids the iPad as it entertains them with games and movies. It is a godsend in the car or at a restaurant. Now there is a cheaper version for kids by LeapFrog. This type of item would be classified under HS code 8471.30.00.00 for Portable automatic data processing machines, weighing not more than10 kg, consisting of at least a central processing unit, a keyboard and a display and would be subject to no duty regardless of country of manufacture.

2. Books – The number 1 seller is the Steve Jobs [Hardcover] $17.88 USD or $18.25 CAD. This item is classified under 4901.99.00.91 for Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets, other: hardbound books. Good news folks, you get to read about the founder of Apple without paying any duty.

3. Baby & Toddler Toys – The best seller is Vulli Sophie the Giraffe Teether for $17.27 USD or $17.63 CAD. Sophie would be classified under HS Code 9503.00.90.54 for Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-size (“scale”) models and similar recreational models, working or not; puzzles of all kinds, Other, Toys representing animals or non-human creatures: Other, not battery powered. Sophie is also free of duty regardless of country of manufacture.

4. Dolls – Under this category, the most popular is FIJIT Friends Willa Interactive Toy for $59.75 USD or $60.98 CAD. I’m not quite sure what this toy is but it appears to be some kind of robot that interacts by responding to speech. This toy would be classified under HS code 9503.00.90.53 for Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-size (“scale”) models and similar recreational models, working or not; puzzles of all kinds, Other, Toys representing animals or non-human creatures: Other, battery powered. No duty again regardless of country of manufacture.

5. Beauty Gift Sets – In this category, the top seller is Shany Studio Quality Natural Cosmetic Brush Set with Leather Pouch, 24 Count $16.95 USD or $17.30 CAD. These professional grade brushes are made of goat and badger hair for applying make up and would fall under Harmonized System code 9603.30.90.00 for -Artists’ brushes, writing brushes and similar brushes for the application of cosmetics, Other. No Duty associated with this product.

6. Music – This is a popular category. Many people are downloading their music via online stores such as iTunes but for those of you who still enjoy purchasing a CD, Christmas by Michael Bublé is selling for $11.88 USD or $12.12 CAD. CD’s are classified under HS Code 8523.40.90.00 for Optical Media, Other and has 6% duty associated to it unless it falls under specific tariff treatments. But before you get disappointed this is of no consequence to your wallet as pre-recorded CDs can be free of duty by applying Tariff 9948 as per Customs D memorandum D10-14-51. This Tariff provided duty free importation for goods that were “committed by design to enhance the functioning of computers and other high-tech products” and a ruling by the Canadian International Trade Tribunal in cases AP99-116 and AP2001-097 has found that CDs fall into this Category. So no duty folks!

7. Women’s Wraps and PashminasSakas Pashminas 70″ x 28″ Border Pattern Double Layer Woven Pashmina Shawl / Scarf / Wrap / Stole ( 20 Cool Colors ) $19.99 USD or $20.41 CAD If this pashmina is made real cashmere wool, then in the Customs Tariff it would fall under the classification number 6214.20.90.00 with 18% duty unless it was manufactured in a country that falls under a few particular tariff treatments. So worst case scenario duty would be $3.67 and then provincial sales tax would apply on the sum of $20.41 + $3.67 which is $24.08; plus possible brokerage and shipping charges if applicable.

8. Movies & TV – Another popular category, currently in number 1 position is Harry Potter and the Deathly Hallows Part 2 DVD is selling for $13.99 USD or $14.29 CAD. Just like recorded CDs, DVD movies are classified under HS code 8523.40.90.00 for Optical Media, Other in the Customs Tariff. Once again duty is %6 but by using the duty remission tariff 9948 duty is completely zeroed out.

9. Gourmet Gifts – Under this category the most gifted item on Amazon is Numi Organic Tea Flowering Gift Set in Handcrafted Mahogany Bamboo Chest: Glass Teapot & 6 Flowering Tea Blossoms for $22.99 USD or $23.46 CAD. Included are 6 flowering tea blossoms, 1 x 16 oz glass tea pot which will make a total of 18 pots of organic tea with 100% natural ingredients. As per General Interpretative Rule 3(b), this item qualifies as a set with the item giving this set its essential character being the glass teapot. Glass teapots would be classified under 7013.49.00.90 as -Glassware of a kind used for table (other than drinking glasses) or kitchen purposes, other than of glass-ceramics: Other, Other and is free of duty.

10. Electronics and Computer tablets – These two categories are hugely popular. At number 1 for both we have the Amazon Kindle Fire for $199 USD or $203.10 CAD. At half the price of the iPad, The Kindle Fire is Amazon’s contribution to the tablet market with their full colour multi-touch display and Wi-Fi capability. You can watch movies, listen to music, surf the web and of course read books and magazines; and install apps. Just like the kiddy Leapfrog version and iPads, the Kindle Fire is free of duty.

11. Toys and Games – Toy manufacturer Mattel is top spot with Angry Birds: Knock On Wood Game for $32.95 USD or $33.63 CAD. I’m sure Rovio the company who built the app Angry Birds are making even more money licensing their brand to Mattel. This game would be classified under 9504.90.10.90 for Articles for funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment, Other, Bagatelle and other game tables or boards, Other and is again free of duty.

12. Bath and Shower Sets – Number 1 with their Honey Vanilla Bath Set – Style 34187 by Gift warehouse for $17.42 USD or $17.78 CAD. In this set, Bath gel, soap, lotion, and bath salts in a delicious ”Pure Pleasure Honey Vanilla” scent are combined with a wood massage tool and a sponge. This bath set would be classified under 3307.30.00.90 for Perfumed bath salts and other bath preparations, other bath preparations. Duty is 6.5% which is $1.16 for a total cost of $18.94 plus GST/HST and any applicable provincial sales tax.

13. Kitchen and Dining – In first place is the Cuisinart CSB-76BC SmartStick 200-Watt Immersion Hand Blender, Brushed Chrome for $28.99 USD or $29.58 CAD. This blender is has dishwasher safe, stainless steel blending shaft and comes with a 2 cup plastic beaker and 3 year limited warranty. This product would be classified in the Customs Tariff under HS code 8509.40.90.90 for Electro-mechanical domestic appliances, with self-contained electric motor, other than vacuum cleaners of heading 85.08, -Food grinders and mixers; fruit or vegetable juice extractors, Other, Other; and is duty free.

14. Jewellery – This is the last category I will cover – The most gifted item is the Sterling Silver “A Mother Holds Her Childs Hand For a Short While And Their Hearts Forever” Heart Pendant, 18” for $25 USD or $25.51 CAD. This is pendant is engraved with the inscription as a testament to the enduring love of a mother for her child. A polished 18” sterling silver necklace is also included. Silver jewellery is classified under HS Code 7113.11.90.00 for Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal, Of precious metal whether or not plated or clad with precious metal: Of silver, whether or not plated or clad with other precious metal, Other. With 8.5% duty associated if not manufactured in a country with a free trade agreement with Canada. In this case, duty would be $2.16. GST/HST and provincial sales tax depending on your province of residence will be on the total of $27.67 CAD.

Well that’s it folks, as you can see many of the popular items are free of duty. Just be aware that if you’re thinking about buying someone a gift of clothing the duty rate is 17-18% for most items and jewellery ranges from 5%-8.5% (unless the item is made in the US or Mexico, or another country we have a free trade agreement with; and there not many).

Happy Online Shopping!

Canada Customs Duty and Taxes and Classification of Goods – Canada Customs Duty

Customs Duty is basically a tax or tariff on foreign goods being imported. The amount of duty on a particular commodity is based on the H.S. Code and the Tariff Treament applicable.

The H.S. Code is set under the Harmonized Description and Coding System as developed and agreed upon by the World Customs Organization. Almost all countries of the trading world belong to the WCO and the first 6 digits of the code are universal. The remaining 4 digits of a total of 10 digits that make up the HS Code can be unique from country to country. These codes, duty rates and tariff treatments available are listed in the Customs Tariff linked here for Canada.

The Customs Tariff identifies commodities by sections, 21 in all. Each of these sections is divided by chapters. Chapters are numbered 1-99 and have a heading based on type of goods or material/composition. i.e Section I is titled “Live Animals; Animal Products” and within Section I are chapters 1-5, chapter 1 being titled “Live Animals”, chapter 2 “Meat and edible meat offal”, and so on…

The key to classifying your goods correctly is to follow the “General Rules for Interpretation of the Harmonized System“. There are 6 universal agreed upon rules and 3 Canadian additions. You can read about the GRI linked here for more detail.
The most important rule in my opinion and one that many people get wrong is Rule number 1. That is …”classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such heading or notes do not otherwise require, according to the following provisions…(goes on to rule 2).

The basic meaning of this rule is that you must classify according to the headings if one exists…the most accurate being the correct choice. So for example, if you purchased a hand made wool carpet while on vacation and had it shipped back to Canada and wanted to figure out how much duty would be owing on the item, you would not classify it as wool, or wool fabric. It would also be incorrect to try and classify it as just as wool carpet. A quick look of the headings under Chapter 57 for Carpets and Other Textile floor coverings would result in seeing that the chapter distingushes between “machine knotted” and “other” carpets when it comes to those made of wool. Thus, the correct description of which a heading exists is “carpets, or wool or fine animal hair, other” and the corresponding HS code would be 5701.10.90.00 with a duty rate (for the Most Favoured Nation Tariff 02) of 13%. Now, if the purchased carpet was manufactured in country that qualified for a Tariff Treatment like GPT (general preferntial tariff 09) i.e. Pakistan and you had either a certificate of origin or statement from the exporter in the prescribed format, then the duty rate is usually lower. So make sure to check to see if your goods qualify for a lower rate. It is suprising how many seasoned importers and brokers make this basic mistake.

Classifying correctly is key to paying the correct amount of duty and to avoid administrative monetary penalties (AMPS) or worse, seizure action of your goods and even criminal charges if the value for duty evaded surpass specific thresholds. In the event that you cannot find a classification that fits, you should request an Advanced Ruling. Here is the link on how to make such a request and here is a link for advanced rulings that have already been made. Check there before you request one.

The second key part to assessing duties and taxes is to understand Tariff Treatments (TT). The roughly 200 countries that are members of the WCO are assigned different TT by Canada. Canada also has trade agreements in place with specific countries that qualify for a lower rate of duty to no duty at all. I.e. with US and Mexico, Canada has NAFTA (North American Free Trade Agreement) which has eliminated duty on goods imported within the 3 countries. Canada also has free trade agreements with Israel, Costa Rica, Peru, Chile, Panama, Jordan, and European Free trade association (Iceland, Lichtenstein, Norway, and Switzerland). Just because there is a free trade agreement does not mean that all duties are eliminated. Some agreements cover only specific commodities and can be phased in over a period of time. A list of our free trade agreements and the details and what they cover is linked here.

Goods from countries with no free trade agreements with Canada but are a member of the World Trade Organization, by default, qualify for Tariff Treatment 02 or the Most Favoured Nation tariff (MFN). However, some goods from these countries can qualify for other Tariff Treatments which carry a lower rate of duty than MFN. For example TT 09 – GPT or General Preferential Tariff, can on certain commodities reduce the duty by a few percent or completely to zero. It varies from commodity to commodity. Linked here is page from the CBSA website with guides and forms for Tariff Treatments and Free Trade Agreements. And linked here is the list of countries and the applicable tariff treatments.

*Please note that goods that have import restrictions to Canada usually do not qualify for reduced duty rates under any TT and usually default to MFN and often require permits and have high duty or excise taxes associated. i.e Steel products, dairy, textiles, meat, etc.
*Also please note the requirements of the forementioned link for how origin of goods are determined and the required certificate of origin or statement from the exporter used as supporting proof to use a TT with a lower duty rate of the goods qualify.

So once you’ve figure out what HS classification code is correct, the origin of the goods and then what tariff treatment or free trade agreement applies you should usually use the ad valorum method of declaring the value to Customs…which is the final purchase price/cost not including freight/shipping charges (only from the where the goods left the foreign country and arrived in Canada). I.e.  Wool Hand knotted Carpets from Pakistan so TT 02 would have 13% duty associated but you have a certificate of origin from Pakistan so the goods qualify for TT 09 at lower duty rate of 10%. A savings of 3%! Which can add up if you are a commercial importer…but even if this a one time import, 3% can make a difference as Sales taxes are calculated based on what you purchased the goods for plus duty. So if the carpet was $1000, then duty would be $100 under TT 09 GPT and sales tax (GST/HST) is assessed on $1100.

If this is a personal importation than PST could also apply depending on province of residence. In Ontario and B.C. where the HST has come into force, the cost would be Duty and HST. If the import is a commercial import than only duty and GST would apply.

The only other tax that may an importer may incurr is Excise duty or tax. This is usually associated with Alcohol and tobacco. Check out this link here for the excise rates. Also, on importations of vehicle there is a $100 tax if your car has airconditioning and a green levy tax if its a gas guzzler…check out my previous post on importing vehicles for the details.

I hope this post helps clarify the duties and taxes on imported good to Canada. If you have any questions please post, tweet or email me.

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