How to Calculate Canadian Tariffs

Preferential Tariffs Lower than 6.5% Most Favoured Nation Duty

Nov 17, 2008

Using these seven steps, entrepreneurs can determine the duty rate payable on commercial shipments delivered to Canada.

Below is a case study that shows how to calculate the Canadian tariff rate for importing a product called Powerball from Ireland into Canada. Powerball is a gyroscopic exerciser about the size of a tennis ball used to develop strong hands, wrists and arms as well as rehabilitate muscles atrophied by Repetitive Stress Injuries.

Step 1 – Learn about the Targeted Product

Import businesses should gather as much information as possible about the goods they want to bring into Canada. Many exporters provide descriptive literature and material data sheets via the Internet. Companies motivated to expand their global footprints will gladly provide product samples.

Importers should identify the country or countries where the product is made and the departure point for the final export shipment. Powerball hand gyroscopes are made in Taiwan but the final products are exported from Ireland.

Step 2 – See if Product is Controlled, Restricted or Prohibited

To uncover any special rules for targeted products, Canadian importers are encouraged to:

Unlike certain agricultural and steel products, the Powerball hand gyroscope isn’t subject to import controls or quotas. Similarly, Powerball shipments don’t require special permits or certificates that the CBSA demands for restricted imports such as food, drugs and clothing.

Nor is the gyroscope exerciser on the list of products prohibited from import into Canada. Prohibited imports include used mattresses, hate propaganda and reprints of copyrighted Canadian works.

Step 3 – Determine Product’s 10-digit Tariff Classification Number

Repeatedly using the wrong tariff classification can result in hefty fines, so small businesses often contact the CBSA for help. Where the product has already been imported into Canada, a new importer can also ask the foreign supplier to advise the tariff classification number used on prior trade documentation or invoices.

Otherwise, importers can visit Industry Canada’s online Canadian Importer’s Database then click Search by Product. The database offers 3 different search options.

The second search option uses up to the first 6 digits of the tariff classification number, the internationally accepted Harmonized System Code. Based on prior Powerball shipment invoices, the Irish company may advise that the first 6 digits are 950691. After entering those Harmonized System Code digits into the Canadian Importer’s Database, users then click on the ‘Drilldown to HS10 Product Code Level’ button to find the 4-digit subcategory specific to Canadian imports. The HS10 product code for Powerball is 9090, making the entire tariff classification code 9506919090.

The third search option requires browsing through a list of product categories. For Powerball, one would pick ‘Toys, Games, Sporting Goods and Other Goods for Amusement’. The database then shows a sub-listing for 6-digit Harmonized System Codes from which ‘950691 Articles and Equipment for Exercise, Gymnastics and Athletics’ most closely matches Powerball attributes. Users then click on the ‘Drilldown to HS10 Product Code Level’ button. Prospective Powerball importers then scroll down the results window to find ‘9506919090 - Gymnasium or athletic articles and equipment, N.E.S.’.

Step 4 – Research Special Classification Provisions

For qualifying goods and under specific conditions such as the product’s end use in Canada, Chapter 99 of the Customs Tariff can be invoked to eliminate or reduce the applicable customs duty rate. For example, if Powerball can be medically proven to alleviate arthritic pain then the importer can apply to the CBSA for an advanced ruling that effectively waives tariff requirements via a Chapter 99 special classification provision.

Step 5 – Look up Applicable Tariff Treatment

The country from which the import shipment originates dictates the tariff treatment, either:

Since Ireland doesn’t qualify for Preferential Tariffs, Powerball imports into Canada garner the default Most Favoured Nation Tariff rate of 6.5%.

Step 6 – Multiply Value for Duty Times Tariff Rate

Basically, the value for duty equals what the importer pays for a shipment converted into Canadian funds. For a shipment from Ireland, customs duties equal the Canadian-dollar value of the imported goods times 6.5%.

Consider an import shipment from Ireland that costs 10,000 euros and the exchange rate is C$1.5519 per euro on the start date for direct shipment.

Step 7 – Confirm No Anti-dumping or Countervailing Duties

Canada imposes additional tariffs called countervailing duties on imported goods that the country of origin subsidizes and that cause injury to Canadian industry. Goods imported into Canada at prices less than those in the country of origin may also be assessed anti-dumping duties.

References

The copyright of the article How to Calculate Canadian Tariffs in International Tariffs is owned by Daniel Workman. Permission to republish How to Calculate Canadian Tariffs in print or online must be granted by the author in writing.