Recent changes in Canadian tariff classifications simplified landed cost estimation and administrative processes related to customs declarations for goods whose value does not exceed $500 and that are imported for personal or non-commercial use. These changes provide a significant benefit for U.S. businesses by easing the uncertainty of purchasing from the United States, providing significant cost reductions, lessening paperwork, reducing liability exposure, and avoiding incorrect tariff classification and calculations that lead to audits and penalties.
Canada’s consumers are increasingly buying on-line, providing a significant opportunity for growth in U.S ecommerce with Canada. According to Statistics Canada, in 2010, Canadians placed nearly 114 million online orders, valued at approximately $15.3 billion, with 60 percent of orders from vendors in the United States.
Thousand of Codes, Reduced To Three
In an effort to streamline Canadian import processes, the Canada Border Services Agency (CBSA) implemented new Generic Harmonized System (GHS) tariff codes effective January 1, 2012. The application of the GHS codes simplified the duty calculation and administrative processes of importing goods by Canada-based consumers from foreign mail-order and e-commerce retailers.
Three new GHS codes, also referred to as “tariff baskets”, consolidated and grouped together a number of products that have traditionally been classified individually. These GHS codes were developed as a result of consolidating the 50 most common items being imported through the Courier Low Value Shipments (LVS) Program and the three CBSA Mail Centers. The rules for the application are detailed in Chapter 98 of the 2012 Customs Tariff Act.
Under the Tariff Act, thousands of Harmonized System (HS) codes are used as a basis for assessing customs tariff and to satisfy international commitments. This complex system of codes can be challenging to navigate, particularly for small- to medium- sized U.S. firms that are exporting for the first time. If a firm has numerous products to classify, the process of classifying each product can be tedious and increase the risk of misclassification. In the event of a misclassification, CBSA may reassess the duty amount and charges the shipper or importer with the difference and associated penalties. Inability to assess correct duty costs also means uncertainty in the costs of exporting for the retailers and importing for the customers.