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20140506 Customs 3

CT 101: Introduction to Customs & Trade



Customs law generally governs and controls how goods cross Canada's borders, by imposing reporting and control procedures over all persons and goods entering Canada, and by levying various customs duties, taxes and other excise levies on imported goods.  Customs laws also control, restrict and prohibit the import of certain goods (while trade laws control, prohibit and restrict the export of certain goods and technologies from Canada).  Import and export restrictions can extend to things like firearms, narcotics and cultural property, as well as military, nulclear and chemically sensitve items.

Custom duties are imposed on imported goods through the operation of the Customs Act and the Customs Tariff.  While the Customs Act contains the administrative rules necessary to (among other things) value imported goods, the Customs Tariff sets out the tariff classification and rates of duties imposed on these goods when they are imported into Canada.

On January 1, 1998, most goods imported from and exported to the United States became duty free under the North American Free Trade Agreement (NAFTA), and Canada today has a number of other preferential trade programs with other countries across the globe.  Despite the concessionary treatment of these goods under NAFTA and these other preferential trade programs, the Canada Customs and Border Services Agency (CBSA) has given notice that it is still requiring strict adherence to Canada's tariff classification and valuation provisions, if only for statistical purposes and to protect the integrity of the customs process.

Determining the duty applicable on imported goods is a multi-step process.

Tariff Classification

First, the imported goods must be identified, which is done by classifying them under Canada's tariff classification regime. Canada's system is referred to as the Harmonized Commodity Description and Coding System (the "HS"), and has also been adopted by Canada's major trading partners, including the United States and Mexico (and by all World Trade Organization member nations).

Under the HS System, tariff classification requires classifying imported goods into the 10 digit tariff item which best describes the goods.

Tariff Treatment

Once goods have been properly classified, the correct "tariff treatment" must be determined. The "tariff treatment" will enable the importer to determine the precise rate of duty applicable to the imported goods.

Several tariff treatments potentially apply depending on the origin of the goods. Potential tariff treatments include the Most Favored Nations Tariff ("MFN"), which is the schedule of duty rates applicable to goods imported from most of Canada's major trading partners, the General Preferential Tariff ("GPT"), which applies to goods originating from certain "developing countries", and the United States Tariff ("UST") rates of duty, which applies to goods originating from the United States.

Special rules exist for determining with tariff the good is to be given the benefit of.


After the appropriate tariff class and tariff treatment are determined, the value of the goods must be determined, so as to allow the tariff rate to be applied to some known duty base.

Canada uses the GATT Valuation Code, which is the regime for valuing goods for customs purposes used by most industrialized countries, including the United States and the European Union (and which has also been adopted by all WTO members).

Canada's valuation code is set out in sections 43 through 53 of the Customs Act and is detailed in its application. The Canada Border Services Agency ("CBSA") position regarding valuation has also resulted in many valuation issues (e.g., the treatment of royalties) which have been litigated before the applicable Canadian tribunals and courts and which are closely watched by other countries which have also adopted the GATT Valuation Code.


Trade issues relate to the international supply of goods and services, and would include, for example, anti-dumping, countervailing and NAFTA issues.


Anti-Dumping & Counterveil legislation is part of Canada's trade remedies legislation, and applies in situations were goods are unfairly traded into Canada as subsidized or artificially low prices, thereby affecting detrimentally the domestic manufacture of the same goods. Where this occurs, the goods are referred to as being "dumped" into Canada, and Canada's Anti-Dumping legislation may apply. (Technically, "dumping" will be seen to occur where an exporter sells goods for export at a price lower than what they charge in their home market.)

In Canada, the Anti-Dumping legislation is found in the Special Import Measures Act (SIMA), which is also administered by the CBSA, which investigates complaints, makes determinations of dumping and enforces the payment of duties. CBSA determinations are adjudicated by the Canadian International Trade Tribunal (the CITT), which is required to decide whether the allegedly "dumped" goods have caused or will cause injury to Canadian production, or has or will retard its development. This adjudication is done by means of determining the (1) whether particular goods are in fact being dumped, and then determining the (2) margin of dumping of those goods.


Countervailing duties are imposed when the CITT determines that foreign government subsidies have or will cause injury or retardation.

NAFTA Issues

The North American Free Trade Agreement ("NAFTA") was implemented effective January 1, 1994, and contains, in itself, a number of obligations on each of Canada, the U.S. and Mexico, and a number of dispute settlement mechanisms to deal with those disputes.



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