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20 July 2018 Canada: Duty relief, duty drawback, and remission available for Canadian surtaxes on certain US originating goods EY has confirmed that importers can take advantage of the Duties Relief Program and/or Duty Drawback Program to defer or obtain a refund of the recent surtax imposed under the United States Surtax Order (Steel and Aluminum) (SOR/2018-152) and the United States Surtax Order (Other Goods) (SOR/2018-153) for imported goods that are re–exported or are used as inputs or consumed in producing other goods for export. In addition, the Federal Government has announced a remission program to relieve unfair applications of the surtax or hardship in limited circumstances. Canada is now applying retaliatory "tariffs" on United States (US) origin goods by imposing a 25% surtax on US origin imports of steel and a 10% surtax on US origin imports of aluminum and various finished goods.1 These surtaxes are in response to the US decision on 1 June to impose a 25% and 10% duty on imports of Canadian steel and aluminum, respectively, on the grounds that these imports impair national security as defined in section 232 of the Trade Expansion Act of 1962. For further details, see EY Global Tax Alert, Canada to impose retaliatory tariffs on certain US origin products starting 1 July 2018, dated 14 June 2018. As noted in another EY Global Tax Alert, Canada updates final import surtaxes imposed on certain products originating in the US; CBSA Customs Notice issued, dated 12 July 2018, Canada's Duty Relief and Duty Drawback programs authorized under sections 89 and 113 of the Customs Tariff and administered by the Canada Border Services Agency (CBSA) are available to importers that meet the requirements of the programs and who import goods affected by the Canadian countermeasures and either re-export the goods or use them as manufacturing inputs to other goods exported. Qualifying importers will thus be able to obtain a refund of or defer the payment of the surtaxes in respect of exported goods. In addition, the Federal Government has confirmed it will accept remission applications to relieve unfair/unintended applications of the surtax or hardship in limited circumstances. The Duty Drawback Program provides a refund of the surtax imposed under the orders for goods that meet one of the following:
In order to obtain a refund, qualifying importers must complete the appropriate claim form and attach all necessary documentation to substantiate the import, export and processing (if applicable). The Duties Relief Program provides for relief of the surtaxes, at time of importation, as long as one of the following conditions is met:
Importers must apply in advance to the CBSA, demonstrating that their record keeping is satisfactory to support a request for duty relief and that the subject goods qualify. The CBSA will conduct an onsite validation and, once approved, an authorization number will be provided that will grant the importer relief from payment of the surtax at the time of importation. It will remain the obligation of the importer to pay the surtax if goods become non-qualifying post-importation. Note that authorization does not apply retroactively; surtaxes paid on goods imported prior to receiving authorization can be recovered through a drawback claim once the goods are exported from Canada. If the goods are sold or transferred to another company in Canada, that company must be registered under the Duties Relief Program in order to benefit from the relief of the surtax. The Minister of Finance, under section 115 of the Customs Tariff, has the authority to recommend remission to the Governor in Council for relief and refund of the recently imposed surtaxes. The remission of the surtax2 is used to address exceptional and compelling circumstances that from a public policy perspective are found to outweigh the primary rationale behind the application of the surtaxes. Specifically, the Federal Government will consider requests for remission of the surtaxes that took effect on 1 July in the following instances:
Businesses in the automotive parts, steel, aluminum, metal stamping, export manufacturing, oil & gas, and construction sectors will likely benefit most from both programs and the remission of surtax. Regarding remission of the surtaxes, interested parties can make application in the required format complete with all necessary information. Only companies registered in Canada are eligible to submit requests for remission. Importers interested in applying for remission must ensure that their submissions are completed correctly and in a timely fashion, as the granting of remission does involve some delay, and remissions will not be granted if the information provided is incomplete, inaccurate or not compelling from a sound tax policy and fairness point of view. Likewise, the Duty Relief and Duty Drawback programs require that importers meet certain administrative requirements to qualify for the programs, and importers must continuously demonstrate compliance with program requirements to remain eligible and avoid fines or penalties. As trade tensions in North America and around the globe show no signs of abating, importers would be wise to act expeditiously to take advantage of the aforementioned programs if they are eligible to do so. EY's Global Trade professionals are highly experienced in assisting businesses with applications for remission, duty relief and duty drawback. Document ID: 2018-5885 |
