Unlike corporate income taxes, the costs associated with customs duties can be difficult to identify and quantify. Customs duties do not stand out on financial statements because they are generally included in the cost of goods manufactured and sold.
Opportunities for significant duty savings may also come from free trade agreements, product recalls and warranty reimbursements, along with decisions by Canadian and international courts. Further, recent Canada Border Services Agency (CBSA) rulings and Canadian International Trade Tribunal (CITT) decisions on consumer goods can provide duty saving opportunities.
Companies may be able to reduce duty costs by taking advantage of the following opportunities.
Trade agreements and tariff classification
Companies can take advantage of many trade agreements to help reduce or eliminate duty altogether on most goods. Canadian importers frequently use the North American Free Trade Agreement (NAFTA) and the Generalized Preferential Tariff (GPT), which covers imports from several lesser-developed countries. KPMG can help identify opportunities and establish a program to take advantage of trade agreements that meets CBSA requirements on rules of origin and record keeping.
Each product a company imports must be classified upon entry into Canada, which drives duty rates and preferential treatment eligibility. By reviewing a company's products, KPMG can determine whether a company is declaring the appropriate classifications and whether duty rates can be reduced by correcting the classifications applied.
Consumers' increased focus on safety has triggered greater government interest in ensuring that imported products are safe for Canadians. This change in attitude towards safety is generating more recalls of products that are deemed to be unsafe. If a company has imported a product that was later recalled, there may have an opportunity to recover the customs duties paid on such recalled products.
Importers often seek compensation for the necessary repairs through a manufacturer's warranty provided by the foreign vendor. However, these costs to the importer can result in large payments for repairs that reduce the value of the goods that have been imported. If a company has made such payments, it may be able to use duty refund regulations to alleviate some costs associated with inferior and defective goods.
We can help
The KPMG Trade & Customs group has the expertise and resources to fully and properly advise Canadian importers and exporters in customs and related matters. We offer a wide variety of services including customs and international trade planning, compliance reviews, system analysis and design recommendations, NAFTA certification, tariff classification reviews, duty relief and recovery applications and assistance with exports. Our consultants are a part of KPMG's Global Trade & Customs practice with 260 professionals located in 60 countries around the world.
Our group is well positioned to provide customs services to multinational companies carrying on business internationally. Our understanding of international trade regulations and procedures in key markets around the globe, together with our extensive experience in effective and efficient business processes, can help find practical solutions designed to improve a company's bottom line.
We will review a company's imports to determine the potential for recovering duty paid to the CBSA by the company. KPMG's reviews are unobtrusive and require minimal use of the company's resources. These Duty Recovery Reviews help determine whether the potential for duty refunds exists. Our reviews are also designed to help clients identify compliance issues that may exist within their company.
For any questions or assistance in conducting a customs review, please contact Bob Sacco, John Pajek or Angelos Xilinas.
Information is current to October 08, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500