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Customs duty drawbacks, deferral and recovery

Even though goods have been imported into Canada, and fees, duties and taxes have been paid to get them into the country and to their destination, there are still opportunities to look at historical import data or processes to determine eligibility for customs duty recoveries. Typically, there are two methods to recover customs duties:

  1. Applying for a duty refund under the Canadian Customs Act
  2. Applying for refunds under the Duty Drawback Program

There are mechanisms importers can take advantage of to relieve future duty payments.

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Recovery

Companies can apply for refunds up to four years from the date goods were accounted for through customs except for some limitations under certain free trade agreements. A review of importer profiles may reveal opportunities in the following areas:

Classifications

Canadian customs is structured so if precise information is not available to help classify imported goods, companies could pay higher rates of duty. The highest duty rates are typically placed on classifications that do not have specific descriptions and are listed as “other, other.” RSM can help importers determine appropriate classifications, which can reduce the duty rates applied to imported goods.

Free trade agreements

Canada has been working to diversify trade for the last two decades, and this has recently led to several large free trade agreements signed with Europe, Japan, Vietnam, the United States and Mexico. With these agreements in place, a review of sourcing and supply chains could potentially lead to duty refunds.

Valuations

Companies receiving credits on imported goods for warranties or any other reason, may have the opportunity to reduce the value declared for those imported goods, receiving refunds from the overpayment of duties.

End use applications

The Canadian government has a number of industries which they consider essential, and has created mechanisms for goods entering those industries to be duty free. This includes imported goods which were not originally marked for those industries, but had their use changed after import. If essential use is not declared at the time of import, but is later found to be applicable, RSM can assist in identifying and filing for these refunds.

Duty drawbacks

Companies importing dutiable goods which were subsequently exported in the same condition as they were imported, or goods that have been further processed into other goods, may be eligible to receive a refund. Certain restrictions exist on imported goods that have been further processed when sold within North America.

Additionally, imported goods that become obsolete or are surplus goods subsequently destroyed are also eligible for refunds under the duty drawback program. While most customs programs are available up to four years after goods are imported, drawbacks for surplus or obsolete goods that have been destroyed can be submitted up to five years after the goods have been imported.

RSM can review your import and export processes and data, and assist you in identifying refund opportunities under the drawback program.

Duty deferrals

In Canada, there are a number of mechanisms that can be used to defer or reduce duty payments on future imports of goods. Companies can register to be a part of these programs, but will be required to follow a number of steps to remain compliant.

Our professionals at RSM are able to assist companies with ensuring compliance under deferral programs and assist in the setup of processes and procedures needed to maintain compliance or outsource the compliance of these programs.