Customs Tariff Classification: Importing with Certainty

Goods imported into Canada from the United States or elsewhere may be subject to duties or tariff rate quotas (“TRQs”). Businesses or individuals looking to import goods or products from abroad, either because they are not available in Canada or because they are more affordable elsewhere, should be aware of Canada’s Customs Tariff Classification system, and the tools available to them to ensure they know the cost of importing goods before doing so.

The Legal Framework

Canada is a signatory to the International Convention on the Harmonized Commodity Description and Coding System (the “Harmonized System”). The Customs Tariff (S.C. 1997, c. 36) gives legal effect to Canada’s obligations under the Harmonized System and requires parties importing goods into Canada to classify the goods being imported in accordance with the General Rules for the Interpretation of the Harmonized System (“GIRs”).

The Harmonized System consists of approximately 5,000 commodity groups  or product descriptions divided across 99 chapters, grouped into 21 sections.  Goods are classified into the appropriate chapter, heading, and subheading through the application of the GIRs.

The GIRs comprise six hierarchical rules to be applied, beginning with GIR 1. GIR 1 provides for the classification of goods at the heading level “according to the terms of the headings and any relative Section or Chapter Notes…”  If, and only if, the goods cannot be classified at the heading level through the application of GIR1 should GIRs 2 through 5 be considered and applied. Once the appropriate heading is determined, the next step is to apply GIR 6 at the subheading level, followed by the application of Canadian Rule 1 to determine the Canada-specific tariff item. The tariff item applicable to the goods will determine whether they are subject to duties or TRQs.

Advance Rulings

In recognition of the challenges associated with properly classifying imported goods, the Canada Border Services Agency (“CBSA”) publishes advance rulings, issued pursuant to section 43.1(1)(c) of the Customs Act (R.S.C. 1985, c. 1 (2d Supp.)). In addition to importers located in Canada, non-resident exporters, non-resident producers of the goods in question, and persons authorized to account for the imported goods in question may request an advance ruling by the CBSA.

In order to request an advance ruling, the requesting party must submit a letter to the CBSA, including the following information: 

• Name, address, and status (importer, exporter, producer or authorized representative) of the requesting party;
• Business number (if applicable);
• Name and telephone number of a contract person with full knowledge of the request;
• The principal ports of entry through which the goods will be imported;
• Whether the goods have been the subject of a verification of tariff classification, an administrative review or appeal, a judicial or quasi-judicial review, a request for a national customs ruling, or a request for an advance ruling;
• Whether the goods have previously been imported into Canada;
• The composition and manufacturing process of the goods;
• A description of the packaging and the anticipated use of the goods; and 
• The tariff classification you consider appropriate and your rationale.

If possible, the CBSA also requests that requesting parties submit the manufacturer’s product literature, drawings and/or photographs of the goods, and schematics. 

Disputing an Advance Ruling

After submitting a request for an advance ruling, the requesting party can expect to wait approximately 120 days for a ruling from the CBSA. If the party requesting the advance ruling disagrees with the CBSA’s decision, it has the right to dispute the ruling pursuant to section 60(2) of the Customs Act. It must send a letter, within 90 days of the effective date of the ruling, to the appropriate regional recourse office of the CBSA detailing the arguments which support its proposed classification of the goods at issue. 

We would recommend conferring with legal counsel early in the customs tariff classification process, as the Harmonized System can be difficult to navigate for those unfamiliar with its intricacies. 

Chris Hutchison is a partner with Conway Baxter Wilson LLP, a law firm practicing exclusively civil litigation and advocacy. Conway Baxter Wilson LLP also provides its clients with advice on litigation avoidance strategies. Chris has a general litigation practice with an emphasis on corporate commercial litigation and trade law.
 

[1] http://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system.aspx

[2] https://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2017/html/tblmod-eng.html

[3] GIR 1, Memorandum D10-13-1: https://www.cbsa-asfc.gc.ca/publications/dm-md/d10/d10-13-1-eng.html