Tax & Trade Blog
Georgian Bay: Tariff Class is no Easy Task!
Georgian Bay Leisure Distributors Ltd., 2022 CanLII 139059 (CA CITT) (“Georgian Bay”) is a CITT case highlighting the complexities of tariff classification when importing goods to Canada.!
When importing commercial goods to Canada, there are three things any importer needs to address from a customs compliance perspective:
- the Tariff Classification that applies to the imported goods (i.e., the government needs to know what the good is);
- The Value of the imported goods for customs purposes (i.e., the government needs to know the “base” on which applicable duties and taxes are to apply);
- The Origin of the imported goods (i.e., the government needs to what tariff of duties to apply to the goods, and whether the goods may be eligible for any special rates).
Out of the “Big Three”, we believe that Tariff Classification is the most daunting, oftentimes because of complicated rules that take a layer-by-layer approach – (starting with Chapter and Heading potentially applicable to the imported goods, and then relying on Explanatory Notes and other rules, where provisions look equally applicable. This “tariff classification” process is certainly no easy or intuitive task, not even for the Canada Border Services Agency (“CBSA”) or US Customs Border and Protection (“CBP”)! More problematically, the correct tariff class is a necessary first step to determining possible “duty free” status of the imported goods under preferential trade agreements like the USMCA!
Georgian Bay concerned two models of steel barbecue-type grills, which needed to be properly classified for import purposes. The importer sought an advance ruling pursuant to section 43.1 of the Customs Act (the “Act”). CBSA ruled that the grills fit under tariff item No. 8516.60.90, but after Georgian Bay argued its goods were not electro-thermic (they were “heated” by wood pellets) CBSA revised that to No. 7321.19.90. Georgian Bay then filed an appeal pursuant to subsection 67(1) of the Act, and argued that the grills ought to be under No. 8479.89.90.
At the CITT, it noted that Heading 73.21 applied to:
“stoves, ranges, grates, cookers (including those with subsidiary boilers for central heating), barbecues, braziers, gas rings, plate warmers and similar non-electric domestic appliances, and parts thereof, of iron or steel”;
and that Heading 84.79 applied to:
“other machines and mechanical appliances having individual functions, not specified or included elsewhere in [Chapter 84]”
The CITT concluded that the goods qualified as an “electric domestic appliance” because they needing to be plugged into an electrical outlet to actually work!
Tariff classification is really the first point of customs compliance (after reporting), and it is critical to getting that classification correct. In doing so, there is no substitute for expert advice.
Best practice is also to conduct a Systems Review annually to ensure proper compliance, as where CBSA finds errors, they will generally require corrections up to four (4) years back, and often resulting in significant monetary duties and penalties owing.