Tariffs and Duties

Tariff Determination

Importers must provide CBSA with a detailed description of goods (based on information from the exporter/supplier), including the ten digit HS code, dollar value, and country of origin. CBSA will help determine the rates of duty based on the appropriate valuation method, classification, and tariff treatment.

Duties are applied at the border and usually paid in person by the Canadian importer or a customs broker representative.

Rates of Duty

Tariff rates are outlined by HS code in the Customs Tariff schedule (www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2015/html/tblmodeng.html). The rate of duty for goods depends on the Canadian tariff treatment in relation to the country of origin, which can be affected by the origin of raw materials and components. There are generally four types of preferential tariff treatments:

Products made in Indonesia receive the Most Favored Nation Tariff (MFN). However, if the raw materials or components of the product come from another country, this may affect the tariff rate. Indonesian exporters should refer to the “Rules of Origin” below for more information.

Duty-Free and Quota-Free Imports

Under the Market Access Initiative (MAI) (www.publications.gc.ca/site/eng/442000/publication.html), Canada has eliminated duties and quotas on goods imported from over 49 of the least developed countries (LDCT). The only goods excluded are raw and unprocessed dairy, poultry, and eggs. Trade flows from eligible countries have increased significantly since the Market Access Initiative began over ten years ago. The ability to claim benefits under GPT and LDCT is determined by the Rules of Origin, based on what percentage of the product and its inputs were produced in an eligible country. Goods must also be shipped directly to Canada from the eligible country and be accompanied by a Certificate of Origin.

Indonesia is eligible for the Most Favoured Nation Tariff (MFN) rate.

How this could affect an Indonesian exporter is as follows: If an Indonesian exporter is exporting hiking footwear from Indonesia to Canada, since Indonesia is eligible for MFN, they will be subject to the MFN tariff (16%), while exporters from LDCT countries—such as Cambodia—will have a tariff of 0%. Indonesian firms have to keep this in mind when developing their pricing strategy.

Rules of Origin

Rules of origin determine preferential tariff treatment for imported goods. The correct rate of duty is applied to goods based on the country from which the inputs of the final product were sourced and the country where the final good was assembled. Goods from these countries have preferential access to the Canadian market, and a certificate of origin must accompany the goods as part of the documentation. The onus is on the exporter to provide a valid certificate for the Canadian importer. This will prevent delays in goods being released. An example of a preferential tariff treatment is the LDCT and GPT Regulations. Two rules of origin methods determine if goods are entitled to the benefits of duty-free access to Canada. The first method is the general rule, under which all goods currently entitled to the benefits of the LDCT can qualify under a “wholly produced rule” or a “cumulative” manufacturing process in a LDC or GPT country with value-added inputs or cumulations from other LDCs or Canada. The second method applies specific rules to textile and apparel goods (HS 50–63 classification). A good can qualify under the general rules or one of the more specific rules of origin. For more information on LDCT’s rules of origin please visit CBSA Memorandum D11-4-4 (www.cbsa-asfc.gc.ca/publications/dm-md/d11/d11-4-4-eng.html).

Tariff Rate Quotas and Seasonal Tariffs

Canada enforces tariff rate quotas (TRQs) (www.international.gc.ca/controls-controles/prod/agri/tarif.aspx?lang=eng) on certain agricultural products on the Import Control List, including dairy, poultry, and eggs. Imports within the quota amount are subject to low rates of duty, and imports over the amount are subject to higher rates of duty. Privilege to import is allocated to firms through import allocations (or “quota-shares”). Seasonal tariffs (www.cbsa-asfc.gc.ca/publications/dm-md/d10/d10-14-3-eng.html) apply to certain fresh fruits and vegetables.

Anti-Dumping and Countervailing Duties

In alignment with WTO rules, Canada’s Special Import Measures Act (SIMA) regulates the application of antidumping and countervailing duties on imported goods that cause injury to Canadian industry through dumping and subsidies in the country of origin. Anti-dumping and countervailing duties may also be assessed if goods are imported at prices that are less than their selling price in the country of origin. CBSA maintains a List of Goods Subject to Anti-Dumping Countervailing Duties (www.cbsaasfc.gc.ca/sima-lmsi/mif-mev-eng.html).