The Importance of Choosing the Right Tariff Classification for your Imports
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The Importance of Choosing the Right Tariff Classification for your Imports

As entrepreneurs start to think about expanding their product acquisition beyond Canada, they often find themselves trying to do it all on their own to save money. But international trade can be complicated. While some goods are easy to import and classify, others may require an advance ruling done by a CBSA (Canada Border Services Agency) officer in order to determine its classification.

1. I’m New to Importing Goods to Canada. Where Do I Find The Right Tariff Classification?

Getting familiar with the Customs Tariff and its classification process can help to lower the potential for misclassification leading to heavy duties and penalties for your business.

You can find the tariff classification for your import on the CBSA website. Key considerations should be weight, purpose of the goods, if the goods are packaged and contents. You can also check the CBSA’s Verification Priorities list as this identifies the items typically misclassified and what the correct classification is for those goods.

If you need further information, contact one of our Trade Advisors.

2. Do I Always Need a Certificate of Origin?

The Certificate of Origin is required if you are expecting to take advantage of a preferential tariff, or lower duty rate. Preferential tariffs are only for products made in a country that has trade agreements in place with Canada. Preferential tariffs are not always free and not all of them have the same rate. A full list of Canada’s current Free Trade Agreements (FTA’s) can be found on the Global Affairs Canada website, alternatively you can contact one of our Trade Advisors.

3. So If I Use a Customs Broker, Do I Have to do Anything Else?

Although the purpose of a Customs Broker is to process your paperwork and clear the goods, it does not mean that they are liable for your import. In Canada, the importer has the final responsibility for the goods. This means that even if you paid a professional and a mistake was made, you are still responsible for your goods.

The most common mistakes I see are made when the entrepreneur does not know how to communicate with their Customs Broker which results in misclassification. This is because you may not necessarily know how much detail your broker needs. For example, if you tell your broker that you are importing a desk, they may determine that it will be free of duty as they are assuming that it is for your business. But if the purpose of your desk is residential, then it has a 9.5 per cent duty.

4. How Does CBSA Know That The Goods Were Misclassified?

It will be challenging for CBSA to inspect every single shipment in detail and verify that the classification has been done correctly. Verifications are therefore done randomly. Meaning that a company does not necessarily has to have a specific amount of sales in order to be audited. So, don’t assume that because you are a small business, you will be under their radar.

Another misconception is that if the goods were released by CBSA, then it means your paperwork was done correctly and this may not necessarily be the case. In fact, CBSA can conduct verifications a year later, after the risk management department has identified their verification priorities.

5. How Do I Know If I Am Being Audited?

If the CBSA flags your import to be audited you will receive a letter requesting the relevant paperwork (B3, Cargo control Document, Certificate of Origin, etc). You will be given about 30 days to submit the paperwork. Use this time wisely and recheck your classifications.

If you have already received a penalty but believe it was issued incorrectly, you can contact the relevant CBSA office to request a correction within 90 days of the date on the notice.

6. What If I Find Out That The Goods Were Misclassified Before They Have Been Audited?

If you discover that your products were misclassified, before you have been audited, you can correct the declaration by filling a B2 adjustment. By declaring the misclassification, you will avoid penalties through AMPS (Administrative Monetary Penalty System). But remember, you will still need to pay the duty and GST corresponding to the new tariff.

7. What Kind of Penalties Can I Get?

The most common penalties for importers are for failing to keep electronic records; providing information to an officer that is not true, accurate and complete and misclassifying your product on purpose. For a full list of the contraventions and their associated penalties, visit the CBSA website.

Like with everything in business, knowledge is power. The more you know about the Harmonized System the more likely you are to choose the right classification and avoid penalties. If you would like to learn more about tariff classification and the logistics of importing, take a look at our Import Advisory Service and contact one of our advisors.

About Leslye Sanguino

Leslye Sanguino is one of the International Trade Advisors at Small Business BC. She holds a Bachelor of Business Administration specializing in international business and economics, and a Forum for International Trade Training Diploma (FITT).

From working as a Senior Trade Officer at the CBSA and Trade Commissioner Assistant for Global Affairs Canada, to working for a start-up medical equipment exporter, Leslye recognizes the challenges that small businesses face while exploring opportunities outside Canada and hopes to work with small business to help mitigate these challenges and convert them in opportunities.