On May 31, 2018, the United States announced the imposition of tariffs on imports of certain steel and aluminum products from Canada (at the rates of 25% and 10%, respectively).
In response to these measures, Canada intends to impose surtaxes or similar trade-restrictive countermeasures on up to C$16.6 billion in imports of steel, aluminum, and other products from the U.S., representing the value of 2017 Canadian exports affected by the U.S. measures.
The products subject to countermeasures will be drawn from those listed in Tables 1 and 2 on the Department of Finance Canada website, and are subject to 25 or 10 per cent surtax or similar trade-restrictive measures. You can view the full list of products in scope here.
As a result of these events we’ve received a number of inquiries about these countermeasures and how they impact importers. These and information as we are aware at this time are published below. We will continue to update this page as more information becomes available.
Will the countermeasure tariff override the use of an annex/tariff code?
The use of an Annex code or FTA certificate will override the Most Favoured Nation rate, however it will not eliminate the countermeasure duty.
Will the countermeasure tariff apply as an additional duty rate?
Yes, the countermeasure tariff is considered an extra duty in addition to the duty outlined in the Customs Tariff. If the goods are included in the final target list, they are subject to this surtax upon importation into Canada.
For example, if the duty rate on an item is 7.5% before July 1, 2018 and that item is included in Table 2 of the countermeasures notice it is subject to the countermeasure tariff as well. This means that importers will pay 7.5% duty plus 10% countermeasure surtax which will be accounted for separately on the B3 Customs Entry.
How do the countermeasures affect duty drawback? Can a Canadian import recover the countermeasure surtax when the goods are exported?
Canada’s Duties Relief and Duty Drawback Programs continue to be available to importers for duties, including surtaxes, paid or owed by Canadian businesses that meet the requirements of the programs. (Reference Customs Notice 18-08)
Does the end use of a good affect the application of the countermeasure surtax?
Goods listed in Schedules 1 and 2 of the United States Surtax Order (Steel and Aluminum) and in the Schedule to the United States Surtax Order (Other Goods) which are also eligible under a provision in Chapter 99 of the Schedule to Canada’s Customs Tariff are subject to the surtaxes even though they are entitled to a preferential tariff rate of customs duty under this Chapter. (Reference Customs Notice 18-08)
When will imports into Canada be affected by these countermeasures?
These surtaxes orders take effect July 1, 2018, however they do not apply to U.S. goods that are in transit to Canada prior to July 1, 2018. Importers must have proof that such goods were in transit to Canada prior to July 1, 2018. Such proof may include, but is not limited to, the following documentation: sales orders, purchase orders, shipping documents (for example, a through bill of lading (TBL)), report of entry documents, and cargo control documents. Such proof may be requested at any time by a CBSA officer. (Reference Customs Notice 18-08)
Where will the countermeasure tariff/surtax appear on the B3 entry?
The amount of surtax owing is to be entered in field 39 of B3 Customs Entry. See item 16 on Customs Notice 18-08.
Will goods which are imported under an EOPS special authority be exempted from the surtax?
We have not been officially advised by the Department of Finance.
Does this affect OEM items?
Yes, the countermeasure tariff is considered an extra duty. If the goods are included in the final target list, they are subject to this surtax upon importation into Canada.
Does the countermeasure surtax apply on our products when the HS is the same, but the description provided does not match?
Descriptions are included for illustrative purposes and do not necessarily reflect Harmonized System nomenclature.
Will the countermeasures affect goods that enter a Canadian Free Trade Zone?
Canada’s duty and tax relief is geographically flexible. It can be enjoyed anywhere in the country. Canada’s programs do not restrict investors to a handful of locations. We have not been officially advised by the Department of Finance.
How will this (surtax) be calculated on the B3, the same as Excise tax?
The surtax will be accounted for in the same manner as anti-dumping duty (eg: 10% or 25% of the value for duty) and entered in field 39 on the B3. See item 16 on Customs Notice 18-08.
Could a shipment moving in bond to a bonded warehouse for storage avoid the additional tax?
Although the surtax orders will not apply to U.S. goods that are in transit to Canada prior to July 1, 2018, the surtax will apply on goods released from a Customs Bonded Warehouse or a Sufferance Warehouse on or after July 1, 2018 regardless of the date of importation. Essentially, goods that have already arrived in Canada and are located in a Customs Bonded Warehouse or a Sufferance Warehouse are not considered to be in transit. (Source: CSCB)
Are goods from Puerto Rico included in these countermeasures?
Yes, according to the CSCB goods that originate in Puerto Rico are subject to the surtax.
Will NAFTA eliminate my risk/exposure to countermeasures?
No, the countermeasure tariff is considered an extra duty. If the goods are included in the final target list, they are subject to this surtax upon importation into Canada, regardless of if they are eligible for NAFTA.
Does the surtax apply on goods imported temporarily that are documented on a B3, E29B, or Carnet?
From the CSCB: Yes. The surtax applies to goods of Chapter 99, including goods imported temporarily.
Are goods that are repaired in the U.S. and eligible for re-entry into Canada under heading 9992 subject to surtax?
From the CSCB: Paragraph 8 of Custom Notice 18-08 provides guidance on the application of Chapter 99 as it relates to the surtax orders by stating that goods listed in the surtax orders which are also eligible under a provision of Chapter 99 are subject to the surtaxes even though they are entitled to a preferential tariff rate of customs duty under this Chapter. The surtax only applies to goods listed in the surtax orders. If a good is not subject to a surtax, repairs for these goods in the U.S. would not be subject to a surtax. The CSCB is awaiting clarification regarding goods eligible for entry under heading 9814.
Paragraph 10 of Customs Notice 18-08 indicates that the Duties Relief and and Duty Drawback Programs continue to be available for duties and surtaxes paid or owed by Canadian businesses. Does the fact that the term “Canadian businesses” was used in the Customs Notice indicate that it is only a Canadian business that can make a drawback claim, and not necessarily the eligible parties listed in D7-4-2?
From the CSCB: There are no restrictions specific to the surtax with respect to who may utilise the Duties Relief and Duty Drawback Programs. The criteria in paragraph 5 of D7-4-2 continues to apply.
Can we protest or lobby this with an email or letter to any email or “hotline” set-up for companies affected?
Surtax is not subject to appeal under the Customs Tariff or the Customs Act nor any other legislation. An opportunity was provided to comment on the initial notice but that window closed on June 15.
I’ve found another HS code for my good that’s not on the list of affected tariffs. Can I use that to classify my goods and avoid the surtax?
Importers should be very careful when considering this action. To change the classification of a good that was imported under one HS code to another would mean having to file an amendment for all previous entries using that original tariff for that good under the Reason to Believe requirement. Failing to do that could result in penalties and additional scrutiny by CBSA.
What do I do if the countermeasures surtax has been applied in error?
Contact your broker if an overpayment of surtax has been identified. A Canada Customs – Adjustment Request may be filed in a CBSA regional office requesting a refund of the amount overpaid.