Classification of Goods
As a member of the World Customs Organization (WCO), Canada’s classification system is based on the WCO’s Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS). HS codes define and describe imported products and assign an applicable unit of quantity/measurement and rate of duty. When an exporter exports goods to Canada, having the correct HS classification of goods is extremely important. It helps the exporter and their Canadian buyer in a number of ways:
- Indicates applicable Canadian regulations that the goods need to comply with to enter the Canadian market;
- Ensures the correct application of duties and other levies on the goods;
- Avoids delays at the Canadian border; and
- Helps the exporter develop a competitive pricing strategy for the Canadian marketplace by allowing them to estimate the customs valuation of their goods as well as mark-ups along the distribution chain.
Harmonized Tariff System
Canada has its own Customs Tariff Structure based on the World Customs Organization Harmonized Tariff System. The HS Code is a 10-digit number that defines and describes the imported product to determine the applicable rate of duty. The first six digits are common identifiers used across all countries, while the last 4 digits are unique to Canada.
Determining Your HS Code
Having the correct HS code for exportable goods is vitally important because this is how fees, duties, and other levies will be applied at the border. The right HS code also reduces the risk of noncompliance. Having the wrong HS code can result in penalty fees and delays at the border. Exporters can look up their HS Code in CBSA’s Customs Tariff schedule (www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2015/html/tblmod-eng.html), which includes over 10,000 tariff classifications organized into 22 sections and 99 chapters progressing from raw materials to more processed commodities and finished goods. Chapter 77 is reserved for future use, and Chapter 98 and 99 are country-specific. With the possible convergence of HS product descriptors, classification becomes a complex process. Determining the correct tariff classification should be undertaken in partnership with an experienced importer or customs broker. The Canada Border Services Agency (CBSA) requires individual imports to be identified by 10-digit HS codes. Importers could be fined if the 10-digit code is not provided.
For more information and guidance on HS Codes:
- Harmonized Commodity Description and Coding System (CBSA): www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/hcdcs-hsdcm/menu-eng.html
- Canadian Export Classification Manual (CBSA): www.statcan.gc.ca/pub/65-209-x/65-209-x2015000-eng.htm