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Customs Tax Changes — Review Imports for Duty Reductions - by John Pajek and Angelos Xilinas  

Global Tax Adviser

 

March 26, 2013

 

John Pajek
Toronto, Trade & Customs

 

Angelos Xilinas
Vancouver, Trade & Customs

 

The 2013 federal budget included several changes to tariffs and other customs measures that may affect taxpayers who import goods into Canada. This article highlights budget changes related to targeted tariff relief, simplifying bonded warehouses and the general preferential tariff regime.

Tariff relief
The federal government will eliminate tariffs on children's clothing and sports and athletic equipment (excluding bicycles). According to the budget, this change is intended to make prices more competitive between Canada and the United States. This tariff relief will be effective April 1, 2013 on the items listed below. Companies should review the tariff classification of items they import to ensure they take advantage of the duty reductions.

 

Items for which tariffs will be eliminated include:

 

  • Gloves for use in sports (e.g., golf, baseball) (tariff classification 4203.21.10-4203.21.90)
  • Babies' garments and clothing accessories, including knitted and crocheted items (tariff classifications 6111.20.00 - 6111.90.00 and 6209.20.00 - 6209.90.90)
  • Certain waterproof footwear (tariff classification 6401.92.92)
  • Cross country ski and snowboard boots (tariff classification 6402.12.20 - 6402.12.30 and 6403.12.20 - 6403.12.30)
  • Skis, snowboards and equipment for them (e.g., ski poles) (tariff classification 9506.11.90, 9506.12.00 - 9506.19.00)
  • Water skis, surfboards, sailboards and other water sports equipment (tariff classification 9506.21.00 - 9506.29.00)
  • Golf clubs and other golf equipment (e.g., golf balls) (tariff classification 9506.31.00 - 9506.39.90)
  • Table tennis equipment (tariff classification 9506.40.00)
  • Balls for sports (e.g., inflatable balls, cricket balls) (tariff classification 9506.62.90 - 9506.69.90)
  • Ice skates and roller skates (tariff classification 9506.70.11 - 9506.70.12)
  • Exercise equipment (tariff classification 9506.91.90)
  • Other sports articles (e.g., curling stones, hockey sticks, pads) (tariff classification 9506.99.20 - 9506.99.90).

 

Simplifying bonded warehouses
Other changes in the budget are intended to strengthen the advantage of Foreign Trade Zones (FTZ) Programs, which provide duty and tax relief to importers. For example, the annual registration fees for bonded warehouses will be eliminated. Bonded warehouses allow companies to import products into Canada without paying duties and taxes at the time of import. The goods enter the warehouse and duties and taxes are not paid until the goods leave the warehouse and enter the Canadian market.

 

The government will also simplify the FTZ application process to grow the program. To aid in this growth, the federal government will invest $5 million over the next five years to raise awareness in the market for Canada's FTZ advantage. Companies who are interested in setting up a FTZ should look into the possibilities for their company and the operations that may take place in these FTZs.

 

Modernizing the General Preferential Tariff
The budget announced the federal government's plan to modernize the General Preferential Tariff (GPT) that applies to selected countries. Importing companies will need to review the tariff treatments for countries from which they import goods and determine how any changes could affect the duties and taxes they pay when goods cross the border.

 

The GPT treatment was created in the 1970s as a way to grant access to developed markets for developing countries. This access was obtained by granting products a tariff treatment which greatly reduced or eliminated tariffs. Since the 1970s, very little has changed in the list of countries that may take advantage of GPT.

 

As such, the government plans to graduate out of the GPT program 72 higher-income countries and trade-competitive countries, such as China, Korea, Brazil and Mexico, starting January 1, 2015. The government will renew the GPT for the remaining countries for another 10 years.

 

Also introduced in the budget is a mechanism to review the countries eligible for GPT once every two years to determine whether they remain eligible for the preferential tariff treatment. The government says the review will be based on objective economic criteria.

 

Other trade and customs changes
Other announcements in the budget affecting trade and customs include:

 

  • A reaffirmed commitment to the "Beyond the Border Action Plan" through the harmonization of trusted traveler programs and trusted trader programs
  • Investment in the infrastructure of land, air and water ports of entry across Canada totalling more than $100 million
  • A proposal to consolidate all of the trade remedy functions available to Canadian businesses under the Canadian International Trade tribunal.

 

For more information, contact your KPMG adviser.

 

 

 

 

 

Information is current to March 26, 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

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