MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in Customs and Trade Law, particularly in assisting importers in all matters relating to the Origin of imported goods.
The following is a short introduction to our Origin services.
Goods imported to Canada must be reported at the border, be properly classified under Canada 's Customs Tariff, be identified in terms of their proper origin, be properly valued, and clearly and legibly marked in accordance with Canada 's marking rules. Failure to do so may result in the imposition of penalties. Other ramifications will also arise if the steps are not taken properly as, for example, the possible denial of CUSMA/USMCA preferential status if each of the first 2 steps (e.g., classification and origin) are not taken properly.
Section 35.1 of the Customs Act sets out the requirement for importers or owners of goods imported into Canada to furnish Proof of Origin of the goods. Origin is highly significant in that only when the Origin of the goods is determined can the tariff treatment (i.e., the preferential rates of duty applicable to the imported goods) be determined.
Accordingly, 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.
Once the basic tariff classification for an imported good is determined, the next required step is determining whether that good qualifies for CUSMA/USMCA treatment. That generally requires determining if the good originated in a CUSMA/USMCA country under specific rules of origin found in the CUSMA/USMCA, and reproduced in Canadian (U.S. and Mexican) domestic law.
As can plainly be seen, determining origin can be one of the most difficult processes in customs or tax law. Complicating matters, since the Certificate of Origin must be signed by the exporter or producer, based on its knowledge or pre-existing documentation, much work must technically be done by the exporter prior to any export / import of the goods taking place.
Tip: Importers may be unpleasantly surprised by the lack of understanding on the part of exporters and producers as to their obligations under CUSMA/USMCA in issuing proper CUSMA/USMCA Certificates. Unfortunately, in too many cases, the exporter or producers processes are lacking, making it difficult for the exporter or producer to substantiate the CUSMA/USMCA Certificates issued when audited by the importing countrys customs administration (called an Origin Verification Audit). Where errors are found, CUSMA/USMCA preferential status can be denied, on a go-backward basis, with the obligation on the exporter to simply notify its importers of that fact.
Perhaps more significantly, the ultimate problem really ends up in the importers lap, with the importer effectively left holding the bag. The reason is that while the exporters obligation stops with simply notifying the importer that CUSMA/USMCA preferential rates never really applied, the voluntary compliance models in place in Canada and the U.S., require the importer to take subsequent positive steps to correct for the importations. Corrections usually mean claiming MFN rates instead of CUSMA/USMCA rates, which sometimes means applying positive rates of duty to historic importations, and paying those duties to Canada Customs, plus interest.
Millar Kreklewetz LLP has extensive experience in advising as to the proper country of Origin of imported goods and the Origin requirements for the same.
The Canada Border Services Agency (the CBSA) continues to focus on origin determination in terms of Customs post-entry verification review for CUSMA/USMCA compliance. Further, in our experience, Certificates of Origin are also coming under increasing review, as is the origin and tariff classification analyses which underlie the Certificates.
The basis for CUSMA/USMCA verification is found in Chapter Five of CUSMA/USMCA which sets out the basic legal requirement for claiming preferential status. The basic rule that where preferential status is claimed, an importer must have in its possession, a valid, properly prepared CUSMA/USMCA Certificate of Origin (CO).
Millar Kreklewetz LLP offers significant expertise to its Clients who are dealing with Verification Audits. In addition, Millar Kreklewetz LLP offers Clients a reverse-audit strategy designed to parallel the approach that the CBSA itself takes in auditing customs compliance. At Millar Kreklewetz LLP, we call this process our Multi-Program Review, and that is simply a reverse-audit approach aimed at verifying a businesss compliance at the border, and focuses on analyzing the information provided by your company in past importations (generally from a series of 20 to 35 sample importations over the last calendar year), in order to ascertain your level of overall customs compliance emulating the approach that the CBSA takes under its Program Compliance initiative. It is also aimed at conducting an overall assessment of your companies ability to import and accurately report and account for goods emulating the approach that Canada Customs takes under its System Review initiative.
In addition to offering significant expertise to our clients with respect to Origin requirements, Millar Kreklewetz LLP also has significant expertise in obtaining Advance Rulings from the CBSA as to whether goods qualify as originating goods and are entitled to the benefit of preferential tariff treatment under a free trade agreement.
Determinations and Re-determinations and Origin Litigation
Millar Kreklewetz LLP also has significant experience in filing administrative appeals to the CBSA in respect of determinations, re-determinations or further re-determinations made by the CBSA. Where necessary, we litigate Origin matters before all relevant bodies, tribunals and courts, including the Tax Court of Canada, Canadian International Trade Tribunal, Federal Court, Federal Court of Appeal, and the Supreme Court of Canada.