basics of canadian importation from a u.s. … of canadian importation from a u.s. company’s ......

BASICS OF CANADIAN IMPORTATION

FROM A U.S. COMPANY’S PERSPECTIVE :

IMPORTING TEXTILES AND APPAREL

Presented by: Alli M. Baron

Sharretts, Paley, Carter & Blauvelt, P.C.

April 23, 2013 at 2:00 PM

Sharretts, Paley, Carter & Blauvelt ,P.C.

About Sharretts, Paley, Carter & Blauvelt, P.C.

Sharretts, Paley, Carter & Blauvelt, P.C. (“SPCB”) is a preeminent firm in the field of global customs and international trade law. We serve clients ranging in size from large multi-national corporations to small family-owned businesses and individuals located across the United States and around the world. SPCB prides itself on assisting clients not only on matters relating to U.S. customs law, but also on assisting clients on a global level. We have successfully represented clients’ interests in Canada, Asia, Australia, Europe, Mexico, Latin America, South America and the Middle East.

Today’s Presenter

Alli M. Baron

Member

Sharretts, Paley, Carter & Blauvelt, P.C.

75 Broad Street

New York, NY 10004

abaron@spcblaw.com

(212) 425-0055

Today’s Webinar

• Pre-importation requirements

• Importation procedures

• Tariff classification and treatment

• Value for duty (and tax)

• Post-importation requirements

• Other important information: importer programs and other considerations such as intellectual property

• Conclusion

• Questions

Pre-Importation

Requirements

Canadian Business Number

• Required for all commercial importers and exporters

• 15 digit number • Example: 123456789RM1234

• Registration/status changes • By phone: 1-800-959-5525

• Online: www.businessregistration.gc.ca

• By mail: Form RC1– Request for a Business Number (BN)

Prohibited and Controlled

• Plant and Animal Products

• Certain Consumer Products

Prohibited and Controlled

Permits

• Import Permits

• CITES Permits

Certificates of Origin

• Certificates of origin are generally not required for the importation of textile and apparel products

• Form A: Certificate of Origin, or the Exporter’s Statement of Origin

• Form B255: Certificate of Origin– Textile and Apparel Goods Originating in a Least Developed Country Sharretts, Paley, Carter & Blauvelt ,P.C.

Certificates of Origin

Standards & Testing

• Standards Council of Canada • Canada’s National Standards System • Canadian General Standards Board • NAFTA goods • Upholstered and stuffed articles

• Flammability standards

• Children’s products

General Labeling and

Marking Requirements

• The Consumer Packaging and Labeling Act’s general labeling requirements:

• Product identity information

• Quantity

• Manufacturer identification

• Language considerations and requirements • NAFTA origin

• Non-NAFTA origin

Textile Labeling

Canada’s Textile Labeling Act and Textile Labeling and Advertising Regulations: Consumer Textile Articles: “any textile fibre, yarn or fabric, or any product made in whole or in part from a textile fiber, yarn or fabric that is in the form in which it is to be sold to any person for consumption or use.”

Required Information:

• Fiber Content

• All fibers present in an amount of 5% or more by weight in the article must be disclosed on the label by generic name and percentage by weight in the article

• Dealer Identification

• Name and address of the importer, manufacturer or distributor in Canada; or

• CA Number

• Country of Origin

• Labeling Specifications:

• Labels must be permanent and able to withstand at least ten washings

• All required information must be in English and French; two separate labels may be used

• Care Labeling: Optional

• Voluntary standard CAN/CGSB 86.1-2003– Care Labeling of Textiles

• If included, care instructions must be in English and French

• Size Labeling: Optional

Textile Labeling

Labeling and Marking

Québec’s Charter of the French Language:

• Any inscription on a product, its container or on its wrapping, or on a document or object supplied with it” must be in French.

Upholstered and Stuffed Articles

• Québec

• Ontario

• Manitoba

Importation Procedures

Documentary Requirements

• Cargo Control Document (CCD)– 2 copies • Form A8A(B)

• Invoice– 2 copies

• Canada Customs Invoice (CCI) • Commercial invoice containing same information as a CCI • Commercial invoice containing certain information and a CCI providing

the remaining information

• Customs Coding Form B3– 2 copies

• Import permits, certificates or other required government forms (e.g., CITES permits, Certificates of Origin, etc.)

Customs Coding Form B3

Examinations

Examinations for: • Detection of prohibited and/or restricted goods • Verification of compliance with Customs regulations and

other legislation

Release Procedures

• Release Options:

• Release with Full Accounting and Payment • Paper option

• Release on Minimum Documentation (RMB) • Electronic transmission of documentation required for most goods using the

Electronic Data interchange (EDI) system

• Commercial Hand-Carried Goods Release (HCG) • Alternative release option to submitting paper B3 Customs Coding Form

• “Carrier” defined as “the owner or person in charge of a conveyance that is engaged in international commercial transportation of specified goods.”

• In-bond shipments are not eligible

Payment

• Payment methods

• Payment for goods released under RMD • Goods may be released prior to payment of duties and

• Penalties

• Interest

Warehousing and Storage

• Bonded Warehouse • 4 years • Deferral of duties • Certain value-added alterations permitted • Duty deferral program

• Sufferance Warehouse

• Privately owned and operated • 40 days

• Place of Safekeeping

Importation Checklist

• Do you have a Canadian BN number?

• Are the goods you intend to import subject to import prohibitions and/or controls?

• If so, have you obtained the necessary permits?

• Have you identified the country of origin of your goods and completed a

certificate of origin, if applicable?

• If applicable, do your goods comply with Canadian safety standards?

• If testing is required, have the goods been tested for compliance?

• Are your goods properly labeled – in terms of label content, placement,

language and any other required specifications?

• Are your goods accompanied by all requisite documentation?

• Have you calculated and paid the correct duties and taxes on your goods?

Tariff Classification and

Treatment

Canada’s Tariff

Canada’s Customs Tariff–

• Tariff classification • Applicable tariff treatment

• Most favored nation (MFN) • Preferential tariffs

• For example: NAFTA • Special tariff provisions

• For example: General Preferential Tariff (GPT) • Rate of duty

Advance Rulings

• Canada Border Service Agency Client Services Offices

Canadian Taxes

• Goods and Services Tax (GST) • 5% • Payable upon entry for most goods

• Other taxes not generally applicable to the importation of textiles and apparel

North American Free Trade Agreement:

• Duty-free treatment in Canada of imported goods of U.S. or Mexican origin

• NAFTA Import Permit (certificate) required

• Special NAFTA Certificate of Origin required

• Satisfaction of NAFTA rules of origin required

• Textiles and apparel are generally subject to a “yarn forward” rule of origin

Other FTAs and Special

Tariff Provisions Free Trade Agreements–

• Canada-Chile Free Trade Agreement (CCFTA) • Canada-Colombia Free Trade Agreement (CCOFTA) • Canada-Costa Rica Free Trade Agreement (CCRFTA) • Canada-European Free Trade Association Free Trade Agreement (CEFTA) • Canada-Israel Free Trade Agreement (CIFTA) • Canada-Jordan Free Trade Agreement (CJFTA) • Canada-Peru Free Trade Agreement (CPFTA)

Special Tariff Provisions– • General Preferential Tariff (GPT) • Least Developed Country Tariff (LDCT) • Commonwealth Caribbean Countries Tariff (CCCT) • Australia Tariff (AUT) • New Zealand Tariff (NZT)

Trade Incentive Programs

• Duties Relief Program

• Drawback Program

• Customs Bonded Warehouse Program

Value for Duty

(and Tax)

Determination of Value for Duty

Methods for Determining Value for Duty:

1) Transaction Value

2) Transaction Value of Identical Goods

3) Transaction Value of Similar Goods

4) Deductive Value

5) Computed Value

6) Residual Method

Transaction Value:

Canada’s Customs Act, subsection 48(1), states that, “the value for the duty of goods is the transaction value of the goods if the price paid or payable for the goods can be determined and the goods are sold for export to Canada to a ‘purchaser in Canada.’”

Transaction Value

Customs Act, Subsection 48(1) requires the importer to show:

1) That the goods have been “sold;”

2) That the sale was a sale “for export to Canada;”

3) That the purchaser in the sale for export to Canada was the “purchaser in Canada;” and

4) That the price actually paid or payable can be determined.

Transaction Value

Goods Have Been “Sold”

• The vendor has transferred, or has agreed to transfer, title for a price to the purchaser of the subject goods

Goods Have NOT Been “Sold”

• Goods imported on consignment

• Leased goods

• Barter transactions

• Trade-Ins

• Goods invoiced at no charge

• Package deals

Transaction Value

Sale for Export to Canada

• Goods imported into Canada as a direct result of a sales agreement between the purchaser (in Canada) and the vendor.

• There may be more than one sale or agreement to sell before the goods are imported into Canada.

• A purchaser (outside of Canada), at the time of ordering the goods, directs the goods to be sent to Canada for his/her own account and risk, and has agreed to pay or has paid a price for the goods.

• Canada (Deputy Minister of National Revenue) v. Mattel Canada, Inc. (2001): “…the relevant sale for export is the sale by which title to the goods passes to the importer. The importer is the party who has title to the goods at the time the goods are transported into Canada.”

• Ontario’s Sale of Goods Act, referenced in Cherry Stix Ltd. V. President of the Canada Border Services Agency (CITT, 2010; 2005), states: “When there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such a time as the parties to the contract intend it to be transferred.”

No Sale for Export to Canada

• Goods have not changed ownership between the time the decision was made to export the goods to Canada. and the time of importation into Canada

Transaction Value

Purchaser In Canada

• Business residents of Canada

• The business must be “carrying on business” in Canada

• Management and control of the business must be in Canada

• Permanent Establishments in Canada

• A “fixed place of business” in Canada through which business is carried on

• There must be a place of business in Canada;

• The place of business in Canada must be fixed; and

• The business of the purchaser in Canada must be carried on through the fixed place of business in Canada.

• Usually, the permanent establishment is a related party to a foreign parent who has established a branch in Canada, but whose day-to-day operations are not wholly managed and controlled in Canada.

Transaction Value

Purchaser In Canada, cont.

• Non-Resident Importers

• A purchaser located outside of Canada that has no presence as a resident or permanent establishment in Canada and who purchases goods in a sale for export to Canada for its own use, enjoyment or consumption may qualify as a “purchaser in Canada” for purposes of transaction value, provided the goods are not for sale in Canada.

• Usually, a non-resident importer is a business that imports goods into Canada using the transaction value method and is the party responsible for the payment of any applicable duties and taxes in respect of those goods.

• Presumption is that the importation and retention of goods imported into Canada by non-resident importers is for speculation purposes.

Transaction Value

Price Paid or Payable

• “…the aggregate of all payments made or to be made, directly or indirectly, in respect of the goods by the purchaser to or for the benefit of the vendor.” (Customs Act, Subsection 45(1))

• NOTE: Canada’s GST is NOT included in the price actually paid or payable

Transaction Value

Transaction Value Price Paid or Payable, cont.

Additions:

• Packing costs

• Commissions and brokerage fees

• Assists

• Royalties and license fees

• Subsequent proceeds

• Transportation costs and insurance costs to the place of direct shipment to Canada

Deductions:

• Cost of transportation from the place of direct shipment to Canada

• Costs arising after the goods have been imported (e.g., construction, maintenance, technical assistance)

• Import duties and taxes

Transaction Value

Place of “Direct Shipment”:

• “…the place of direct shipment is the physical location of the goods, following an event, at the point in time when goods begin their direct and uninterrupted journey to a specific destination in Canada. This will usually be the location where the goods are loaded onto the carrier with Canada identified as the destination.”

• Costs incurred for transportation to the place of direct shipment

• Added to price paid or payable, if not already included

• Costs incurred for transportation from the place of direct shipment

• Deducted from price paid or payable, if already included

If transaction value cannot be used to determine the value of the imported goods for duty, another method must be used:

1) Transaction Value of Identical Goods

2) Transaction Value of Similar Goods

3) Deductive Value

4) Computed Value

5) Residual Method

Determination of Value for Duty

Post-Importation

Requirements

Recordkeeping • All records relating to imports must be kept for six years

• Electronic or paper formats

Self-adjustments Possible Outcomes:

• Owe additional duties and taxes • Interest must also be paid

• Revenue neutral • Refund of duties and taxes

• Duties will be refunded and applicable GST credit or rebate will be made

Importers are required to correct any errors within 90 days after the error is discovered if the outcome is either revenue neutral or the importer owes CBSA additional duties and taxes. Importers whose change in information results in a refund owed may typically file for a refund up to four years from the date the goods were accounted for.

Self-adjustments

Enforcement

CBSA Verifications/Audits:

• Random verifications

• Risk-based/targeted verifications

• Certain apparel and footwear goods included on CBSA’s 2013 national verification priority list (valuation)

• Certain bedding and drapery goods included on CBSA’s 2013 national verification priority list (origin)

Enforcement Single Program Audit:

• Classification– sample of 5 to 10 imports • NAFTA– questionnaire • Desk audits

Multi-Program Audit

• CBSA selects a company and reviews entries occurring over the most recent fiscal period

• Questionnaires, presentations, systems review, etc. • In-depth review, looking at overall compliance • Audit team visits

Single Program Audit:

• In-depth review of 5-10 imports • Audit team visits

Monitoring Program Audit

• Follow-up, desk audit

Enforcement

Administrative Monetary Penalty System (AMPS):

• Failure to pay duties • Failure to report goods to CBSA • Unauthorized removal of goods from a warehouse • Failure to provide required information to CBSA • Direct delivery of goods prior to release from CBSA

control

Preparing for an Audit

Documentation: • “Sale for export to Canada”

• Purchase orders, commercial invoices, receiving records, proofs of payment, flow chart describing import process, etc.

• “Purchaser in Canada” • Articles of incorporation, bank statements, organizational charts,

leases, tax returns, buying agency agreements, etc.

• Import documents • B3 Forms, Canadian Customs Invoices, certificates of origin, etc.

• Tax/Financial documents • Chart of accounts, accounts payable, general ledger, etc.

• Other documents • Bills of lading, list of foreign and domestic vendors, contracts, etc.

Other Important

Information

Temporary Importation,

Returns, and Samples

Temporary Importation: • BN number • Form E29B: Temporary Admission Permit

Goods Returned: • Goods repaired • Goods worked on or altered

• U.S., Mexico, Chile, Israel or other CIFTA beneficiary country

Samples: • Apparel Samples

Importer Programs

• Commercial Driver Registration Program (CDRP)

• Customs Self-Assessment Program (CSA)

• OGB Interface

• Partners in Compliance

Other Requirements Intellectual Property Concerns:

Trademarks in Canada

Conclusion

For More Information:

• Visit Canada Border Service Agency’s website: http://www.cbsa-asfc.gc.ca/

• Visit the Office of Textiles and Apparel’s (OTEXA) Canada webpage: http://web.ita.doc.gov/tacgi/OverSeasNew.nsf/alldata/Canada

• Visit Canada’s Competition Bureau’s CA Number webpage: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_02575.html?OpenDocument

basics of canadian importation from a u.s. … of canadian importation from a u.s. company’s ......

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