What is a Non-Resident Importer (NRI?)
A Non-Resident Importer (NRI) is a company that does not reside in, nor has a physical establishment in Canada, but acts as the Importer of Record and assumes the responsibilities of Final accounting and regulatory compliance with Canada Customs regarding correct payment of duty & taxes for goods imported into Canada.
Opportunities & Benefits:
• Expand your sales in Canada, without perceived cross border hassles by potential customers.
• Provide price guarantee to leverage more sales and customers by providing a landed cost at time of sale. Your price can be set competitively with that of established suppliers selling similar products to Canada.
• Control the process at the border by dealing with one customs broker working on your behalf instead of dealing with each customer’s individual broker asking repeatedly for the same information: NAFTA Certificates, documents and product information.
• Consistency in product classification resulting in correct payment of duty & taxes on going.
• Reduced Brokerage (service fees) by utilizing consolidation clearances, distribution channels and your sales volume to Canada.
• Warranty and sample shipments can be delivered free to your customers. No additional tax or duty payable by them, which achieves a reputable and forward-looking business stance of taking care of your customers.
• With increased volume, offshore shipments can be imported direct to Canada many times resulting in lower duty. No need for the cost of US import, logistics and re-export of your product to Canada. You can take advantage of Warehousing and distribution within Canada just like a domestic sale, without the need to set up a physical location.
• Website and catalogue orders are simplified by becoming an NRI; your Canadian customers are never surprised or hassled to pay extra costs when receiving their goods.
The NRI option allows you the appearance of a domestic supplier, the customer simply orders & pays for your product, and receives the goods without ever having to deal with a border.
There are many more opportunities and benefits that can be realized with the NRI Customs Clearance option, specific to your products & business model.
As with any import/export program in Canada or the USA, every company has to have good practices regarding responsibilities and Regulatory Trade Compliance.
The following are some of the considerations when looking at becoming a Non-Resident Importer:
The Business Number (BN)
The business number (BN) has 15 digits: nine numbers to identify the business, plus two letters and four numbers to identify the program and each account. The system includes major types of Canada Revenue Agency (CRA) and Canada Border Services Agency (CBSA) programs that many businesses may be registered for:
• GST; (identified by RT)
• payroll deductions;
• corporate income tax; and
• Import/export (identified by RM).
For example, your import/export account may look like this: 123456789RM0001
A GST/HST tax registrant account may look like this: 123456789 RT0001
Your next step is to determine whether you will be required to register with CRA for the GST/HST. (Pacific Customs Brokers can assist with further information to determine this)
Maintenance of Books & Records
All NRI’s are required by law to maintain books and records with regards to their imports & commercial activity in Canada. The must be kept for a period of (6) six years from the original date of the import. CBSA may authorize NRI’s to maintain their records outside of Canada. A “Letter of Undertaking” must be submitted and approved by CBSA. This serves as an agreement between the NRI and CBSA as to the availability of their records for Customs Audit purposes.
Goods & Services Tax (GST) Harmonized Sales Tax (HST)
Almost everything imported into Canada is subject to the GST (5%) payable at time of import.
As the GST is a consumer driven tax, it is collected and remitted all the way down the supply chain. As a NRI, you would collect (charge) the tax to your customers much like a state sales tax. This is one way of recovering the tax when you remit it at the time of import of your goods into Canada.
Many NRI’s must register for a GST account and are required to prepare a GST Tax return usually on a quarterly basis or less depending upon volume of sales into Canada. Whether you are required to register is based on if you are “Deemed Carrying on Business in Canada” and/or
you have annual worldwide GST/HST Taxable sales of $30,000. or more. (Pacific Customs Brokers can assist with more information) For further information please read “Doing Business in Canada – GST/HST Information for Non-Residents”
The Value for Duty (VFD) is the selling price of your goods with adjustments. Much like Valuation regulations in the US under Customs Border & Protection (CBP) there are six methods that can be used starting with the Transaction Value. In most cases this is the method used. It would be based on the selling price of your products less any freight, brokerage, duty or tax that you charge your Canadian customer. It is very important to include to the final accounting of your goods that we know exactly what costs have been built in (included) in your selling price declared for customs clearance. A clear statement should be included on your Commercial Invoice (CI) or Canada Customs Invoice (CCI) so that we know what to deduct to determine the correct Value for Duty.
An important difference between USA & Canada Valuation regulations are the USA “First Sale Rule” , which is not valid in Canada. In Canada the CBSA uses the “First Purchaser in Canada” rule.
NAFTA (North American Free Trade Agreement)
This Free Trade Agreement to promote trade for qualifying goods between Canada, United States and Mexico. A complete and valid NAFTA Certificate is key to reduce the duties payable
at time of import. A valid “blanket” Certificate can be completed and kept on file for a period of 1 year with all qualifying goods listed on it. In order for the good(s) to qualify you must determine whether they satisfy the Rules of Origin under Article 401 of the NAFTA Agreement.
? Article 401 of the NAFTA defines originating in four ways:
1. Wholly obtained or produced in the NAFTA region.
2. Goods produced in the NAFTA region wholly from originating materials. Goods taken from the seabed, soil or the air in NAFTA territories.
3. Goods meeting the Annex 401 origin rule.
4. Unassembled goods and goods classified with their parts which do not meet the Annex 401 rule of origin, but contain 60% regional value content using the Transaction method, or 50% using the net cost method.
Goods can originate in Canada, Mexico or the United States, even if they contain non-originating materials, as long as the materials satisfy the rules of origin specified in Annex 401 of the Agreement. (If your goods have incorrect HS tariff classification initially, all the work done to establish eligibility will be meaningless, as below explains).
Tariff Classification (HS code)
A very important component to your import plans is to have your goods correctly classified. The tariff classification dictates the rate of duty charged on each product imported based on the commodity and origin. There are more than 10,000 different classifications in the Canadian Customs tariff. Our tariff consultant specialists can classify your products and provide you with the duty rates and HS code in order to develop your landed cost for Canada and assist you in determining their eligibility under NAFTA.
Customs Clearance Documentation
Customs Clearance documents can be streamlined and easy as long as all the necessary information is provided that is necessary.
Either a Canada Customs Invoice (CCI) or your own internal generated Commercial Invoice can be used for customs clearance. Certain elements should be included on an internal invoice if not using a CCI; date of export, who is responsible for Customs clearance (Shipper/Exporter, Consignee or Purchaser, Detailed description of goods being imported, Product sku/item number is also important. Currency of Settlement (US$ or CDN$) Condition of Sale/Terms, are just a few.
writtten/submitted by Allison Douglas, CCS
Non-Resident Importer Analyst
Pacific Customs Brokers Ltd.