Customs Notice 24-32: China Surtax Order (2024)

Customs Notice 24-32: China Surtax Order (2024)

The purpose of this notice is to advise that:

1. This notice provides information on the introduction and application of the China Surtax Order (2024), effective October 1, 2024, regarding surtax provisions on Chinese-made electric vehicles (EVs).
2. The surtaxes are introduced by Canada to protect Canadian workers and electric vehicle supply chains from unfair trade practices.
3. The administration of the surtax order is the responsibility of the Canada Border Services Agency (CBSA).

Application

4. Effective October 1, 2024, Chinese-made EVs, including electric and hybrid passenger automobiles, trucks, buses, and delivery vans are subject to a surtax in the amount of 100% of the value for duty in accordance with the China Surtax Order (2024) and sections 47 to 55 of the Customs Act. Schedule 1 of the China Surtax Order (2024) contains a complete list of goods subject to the surtax. This surtax will apply in addition to the Most-Favoured Nation import tariff of 6.1 per cent that currently applies to EVs produced in China and imported into Canada.
5. The surtax will only apply to goods that originate in China, which shall be considered as those goods eligible to be marked as goods of China, in accordance with the Determination of Country of Origin for the Purposes of Marking Goods (Non-CUSMA Countries) Regulations.
6. The surtax will apply to commercial and personal importations of goods, even when shipped to Canada from a country other than China.
7. The surtax will apply on goods released from a Customs Bonded Warehouse or Sufferance Warehouse on or after October 1, 2024, regardless of the date of importation.
8. The surtax applies to goods eligible for classification in the tariff items of Chapter 99 of the Schedule to Canada’s Customs Tariff – with the exception of EVs that are temporarily imported for repair in Canada or re-imported into Canada after being exported for repair – even though they are entitled to the Most-Favoured-Nation zero customs duty rate under that Chapter.
9. The surtax does not apply to goods eligible for classification in the tariff items of Chapter 98 of the Schedule to the Customs Tariff, other than the prohibited importation tariff items of 9897.00.00, 9898.00.00 and 9899.00.00.
10. Canada’s Duties Relief and Duty Drawback Programs will be available to importers for surtax paid or owed by Canadian businesses, subject to the provisions of the Canada-United States-Mexico Agreement (CUSMA).

Proof of Origin

11. Pursuant to subsection 35.1(1) of the Customs Act and the Proof of Origin of Imported Goods Regulations, proof of origin must be furnished for all imported goods.
12. For commercial goods, proof of origin may be in the form of a commercial invoice, a Canada Customs Invoice or any other documentation that indicates the country of origin of the goods.
13. Personal importations of goods, also known as casual goods (meaning goods that are imported into Canada other than commercial goods) are deemed to originate in China when the goods are marked as a good of China, or the goods have no country of origin marking and there is no evidence that the goods are the product of a country other than China.
14. Casual goods imported from a country other than China that are marked as made in, produced in or originating in China are deemed to originate in China.

Calculation of Surtax when Accounting for Commercial Importations

15. The amount of surtax payable is calculated in the amount of 100% of the value for duty of the imported good in accordance with the China Surtax Order (2024).

Example 1:

The value for duty (VFD) of an imported good subject to a surtax is $150. The imported good has a Most Favoured Nation (MFN) duty rate of zero per cent. The applicable surtax is 100 per cent, as per the Schedule to the China Surtax Order (2024).

The amount of surtax is calculated as follows: $150 (VFD) x 1.00 (per cent surtax) = $150 (surtax payable).

Example 2:

The same imported good is subject to an MFN duty rate of 6.1 per cent.

The amount of customs duties is calculated as follows: $150 (VFD) x 0.061 (rate of Customs duty) = $9.15 (Customs duties payable).

The amount of surtax is calculated as follows:

$150 (VFD) x 1.00 (per cent surtax) = $150 (surtax payable).

Exceptions to Surtax

16. The surtaxes will not apply to Chinese goods that are in transit to Canada on the day on which these surtaxes come into force. For the purpose of this Customs Notice, ‘in transit to Canada’ refers to goods bound for Canada under the control of a carrier. Importers must have proof in their possession that such goods were in transit to Canada. Such proof may include, but is not limited to, the following documentation: shipping documents (for example, a bill of lading), report of entry documents, and cargo control documents. Such proof may be requested at any time by a CBSA officer.
17. In the following scenarios, the importation would not be subject to the surtax:

1. The temporary importation of foreign conveyances – for example, a U.S.-registered truck moving cargo, a U.S.–registered bus transporting passengers, or a U.S.–registered electric vehicle made in China driven into Canada by a U.S. tourist (Chapter 98 of the Schedule to Canada’s Customs Tariff waives all duties and taxes on such importations).
2. Returning Canadian-registered conveyances and other goods that are made in China and duty-paid – for example, a Canadian tourist is returning from the U.S. in an EV, or a Canadian-registered cargo truck or bus (such goods would have previously been released and accounted for under the Customs Act before its sale to the Canadian owner).
3. Goods including EVs that are made in China and are repaired or altered across the border – for example, a U.S.–registered EV repaired in Canada, or Canadian-registered EV repaired in the U.S – including an emergency or non-emergency repair for both scenarios.

Accounting

18. The amount of surtax owing is entered in field 85 “Surtax” of the Commercial Accounting Declaration in the CBSA Assessment and Revenue Management (CARM) system.
19. Accounting for surtax under the China Surtax Order (2024) will follow the instructions outlined in Memorandum D16-1-1, Information pertaining to the application, collection, and adjustment of a surtax.
20. When an amount of surtax is being declared at importation, refer to Memorandum D17-1-10, Coding of Customs Accounting Documents for additional information on completing the Commercial Accounting Declaration.

Preparing for the CARM October Implementation – Cutover Period

21. Effective October 21, 2024 the CARM system will become the official system of record for importers and other trade chain partners (TCPs) to account for their goods and pay for their duties and taxes owed to the CBSA.
22. CBSA has announced a cutover period from October 4 (4:00 pm EST) to October 21 (3:00 am EST) to migrate existing systems and functionality to CARM systems and functionality. For further details, please see Customs Notice 24-29: Preparing for the CARM October Implementation – Cutover Period.
23. At the beginning of the cutover period, some CBSA legacy systems, such as the Customs Commercial System (CCS) and the Customs Automated Data Exchange (CADEX), will no longer be available starting October 4 at 4:00 pm EST.
24. To align with this cutover period, all submissions of electronic accounting documents (B3s) related to this surtax, including those prior to the cutover period (i.e. from October 1 to October 4), must be held until CARM functionality and the Commercial Accounting Declaration is available on October 21 and entered into CARM in accordance with the schedule outlined in paragraphs 22 and 23 of Customs Notice 24-29.

Corrections, Re-Determinations, and Refunds

25. Corrections to original declarations and requests for re-determinations are to be made in the prescribed form and manner under the relevant provisions of the Customs Act, in accordance with the procedures outlined in Memorandum D11-6-6, “Reason to Believe” and Self-Adjustments to Declarations of Origin, Tariff Classification, and Value for Duty, Memorandum D6-2-3, Refund of Duties and Memorandum D6-2-6, Refund of Duties and Taxes on Non-commercial Importations.
26. Where an overpayment of surtax has been identified, adjustment to the Commercial Accounting Declaration (CAD) may be submitted via the CARM Client Portal (CCP) or via EDI/API requesting a refund of the overpaid amount. If accounting information is being self-adjusted for a surtax refund or surtax payable to the CBSA, refer to Memorandum D17-2-1, Adjusting Commercial Accounting Declarations.
27. The CBSA may re-determine or further re-determine the origin, tariff classification, and/or value for duty on its own initiative or in response to a self-adjustment in accordance the Customs Act and the Determination, Re-determination and Further Re-determination of Origin, Tariff Classification and Value for Duty Regulations. In so doing, as with customs duties and taxes, the CBSA may assess any undeclared amount of surtax.

Examinations and Verifications

28. Importations may be subject to examination at the time of importation and to post-release verification for compliance with the Tariff Classification, Valuation, Origin, and any other applicable provisions administered by the CBSA. If non-compliance is encountered by the CBSA, in addition to assessments of surtax, customs duties and taxes, penalties and interest will be assessed, where applicable.

Advance Rulings for Commercial Importations

29. For predictability and certainty on how goods are to be accounted for, an Origin National Customs Rulings in advance of the importation of goods can be requested from the CBSA. Refer to Memorandum D11-11-1, National Customs Rulings for additional information. Refer to Memorandum D11-11-3, Advance Rulings for Tariff Classification, for additional information on requesting an advance ruling on the tariff classification of goods.

Additional Information

30. Refer to Memorandum D16-1-1, Information pertaining to the application, collection, and adjustment of a surtax, for additional information concerning the administration and enforcement of surtax orders under sections 53(2), 55(1), 60, 63(1), 68(1), 77.1(2), 77.6(2) or 78(1) of the Customs Tariff.
31. For more information call the Border Information Service (BIS) at 1-800-461-9999 (toll-free in Canada and the USA). If calling outside Canada and the United States, call 1-204-983-3500 or 1-506-636-5064. Long distance charges will apply. Our automated telephony service provides general information in English and French on CBSA programs, services and initiatives through recorded scripts. Live agents are also available to assist you Monday to Friday 8 am to 4 pm local time, as per time zones in Canada and USA (closed on federal statutory holidays). TTY is also available within Canada: 1-866-335-3237. Alternatively, you may send your enquiries using our Client Support Contact Form.

Source: CBSA 

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