Click questions to reveal answers.
01 Does the surtax apply to goods imported under the Postal Imports Remission Order (PIRO) and the Courier Imports Remission Order (CIRO)?
Goods released under these remission orders are subject to the surtax. CBSA is aware of the operational challenges and will be discussing with Finance the impact on all parties. The CSCB participated in a conference call with CBSA and other affected parties on July 4, 2018 and CBSA will be bringing concerns to Finance.
02 Will we be advised of an Order-in-Council?
The Order in Council will be included in the July 11, 2018 issue of the Canada Gazette. However, it will not be mandatory to include the O.I.C. on release or accounting documents. CBSA will use the code shown in field 26 of the B3, together with the HS and description of goods, to identify when the surtax applies. Members who wish to include an O.I.C. or other numbers/characters in field 26 for programming purposes may do so. This is considered a free-text field and will not result in CADEX rejects regardless of the information in this field.
03 Please clarify the date that the surtax becomes applicable.
The surtax applies to goods as of midnight June 30, 2018. It does not apply to goods that are in transit before midnight June 30, 2018.
04 Paragraph 7 of Customs Notice 08-18 regarding goods removed from a warehouse and paragraph 19 contradict each other.
CBSA has confirmed that the surtax will apply to ALL goods removed from a Customs Bonded Warehouse or Sufferance Warehouse after midnight June 30, 2018. We believe such goods should be considered "in transit" prior to July 1 but CBSA does not agree.
05 Are goods shipped to Canada from a place other than the U.S. subject to surtax?
Commercial goods that are eligible to be marked as goods from the U.S. and shipped to Canada from a country other than the U.S. are subject to the surtax.
06 Are goods that originate in Puerto Rico subject to the surtax?
07 Does the surtax apply on goods imported temporarily and documented on a B3, E29B, or Carnet?
Yes. The surtax applies to goods of Chapter 99, including goods imported temporarily. When accounting for a temporary importation which is subject to the surtax, in addition to the E29B the goods must be accounted for on a Form B3-3. On the form B3-3, importers must report the surtax order code in field 32 "SIMA Code" of the B3 Form by inserting code "51" for the surtax and importers must enter the amount of surtax owing in field 39 "SIMA Assessment" of the B3 Form.
08 How are non-U.S. goods sent from Canada to the U.S. for processing treated?
If non-U.S. goods are sent from Canada to the U.S. for processing, surtax is payable on the cost of the processing when the goods return to Canada if the origin of the goods has changed to U.S. and if the goods are included in one of the tariff items subject to the surtax.
09 How are U.S. goods sent from Canada to the U.S. for processing treated?
If U.S. goods are sent from Canada to the U.S. for processing, surtax is payable on the value of the goods plus the cost of the processing if the goods maintain their U.S. origin and are included in one of the tariff items subject to the surtax.
10 Goods which originate under NAFTA are imported into Canada duty-free; however, they are subject to the surtax. These goods are further manufactured or incorporated into goods which are then exported to the US where they enter duty free under NAFTA. Is the entire amount of surtax eligible for drawback?
The Duties Relief Program and the Drawback Program respectively relieve or refund duties and surtaxes on imported goods on the condition that the goods are subsequently exported within four years. They provide Canadian companies with the ability to better compete internationally by allowing them to purchase and use raw materials and manufacturing imports for goods subsequently exported at world market prices and without including customs duties or surtaxes in the price of the exported goods.
In this instance, when goods are further manufactured or incorporated into goods which are then exported to the U.S. where they enter duty free under NAFTA, the entire amount of surtax may be eligible for a drawback, subject to compliance of program requirements.
11 Are goods that are repaired in the U.S. and eligible for re-entry into Canada under heading 9992 subject to surtax?
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.
12 Paragraph 10 of Customs Notice 18-08 indicates that the Duties Relief 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?
There are no restrictions specific to the surtax with respect to who may utilize the Duties Relief and Duty Drawback Programs. The criteria in paragraph 5 of D7-4-2 continues to apply.
13 Please clarify when goods imported under heading 9814 are subject to the surtax?
Goods eligible under heading 9814 are not excluded from surtax application and would be subject to the application of the surtax if they are originating from the US and are listed among those targeted for surtax application.Note: We still are waiting for clarification of a few points and have asked CBSA to specifically state whether goods not listed in the surtax schedule remain outside the surtax?s scope when entered under 9814. We believe that this is the intention but do not see that guidance in the Customs Notice.
14 What is the authority to file for a refund of overpayment of surtax?
The authority under which a refund claim would be filed is the same as for any other similar overpayment of duties, i.e. section 74 of the Customs Act.
15 Given the circumstances of the July 1, 2018 implementation, we have asked to CBSA to waive penalties for late accounting.
No answer received yet.
16 Does CCS have a linkage that will automatically reject an entry that contains an HS and an origin that is subject to a surtax? If not, will surtax related errors be eligible for accounting override corrections?
No, CCS will not reject an entry if an HS code and country of origin that are subject to surtax are entered.
Accounting override corrections would not be allowed for surtax related errors, as they would not meet the conditions under which such requests are allowed. As per, D17-1-5, Registration, Accounting and Payment for Commercial Goods, the CBSA will only accept accounting override corrections for clerical, typographical or CBSA keying errors that are evident on the original invoice, and do require a decision to made by an officer in a regional trade office including changes to tariff class, origin, value for duty or tax status.
As per D16-1-1, Information pertaining to the application, collection, and adjustment of a surtax, if surtax is payable or an overpayment is made, an importer must complete a Form B2, Canada Customs – Adjustment Request to request an adjustment.
17 If a B2 is required to correct origin from US to another MFN country, what would be considered acceptable proof of origin? Per Memorandum D11-4-2: Proof of origin for the Most-Favoured Nation tariff treatment must be in the form of a commercial invoice or a Canada Customs Invoice prepared by the vendor indicating the country of origin of the goods, or any other documentation indicating the country of origin of the goods. Would this proof of origin suffice or will the foreign manufacturer have to prove they complied with the Rules of Origin from D11-4-3?
Provided that the goods are required to be marked with another country than the US in accordance with the Determination of Country of Origin for the Purposes of Marking Goods non-NAFTA Countries) Regulations, a B2 refund can be made with an acceptable proof of origin, per the requirements of D11-4-2 for MFN tariff treatment.
18 Is it possible that the temporary bond amount can be increased to cover the amount of the surtax or must the goods be entered under an importer or broker release prior to payment bond?
No, the temporary importation surety bond cannot be used to cover the amount of surtax. Unlike the security deposit for duties and taxes that are relieved under various provisions for temporarily imported goods and which may be covered by a temporary importation bond (standing security), the surtax is a non-refundable payment.
As the surtax it is not eligible for relief for goods temporarily imported under tariff item No. 9993.00.00 it must be paid at the time of importation and is not eligible as a deposit against a temporary importation bond or other form of security. The amount would be paid under usual import/payment procedures.
19 Why must both an E29B and a B3 be filed?
The Form B3-3 must be used to document and pay the amount of the surtax on applicable goods.
If the goods are eligible for customs duty relief under tariff item No. 9993.00.00 and are also eligible for full GST/HST relief under an applicable provision (see Memorandum D8-1-1, Administration of Temporary Importation (Tariff Item No. 9993.00.00) Regulations, Appendix B) then a Form E29B may be required. For additional information on the use of the Form E29B for goods imported under tariff item No. 9993.00.00 please see Memoranda D8-1-1 and D8-1-4, Administrative Procedures Related to Form E29B, Temporary Admission Permit.
20 Does the same rule (as stated earlier for E29Bs) apply to carnets as well?
Yes. If the surtax is applicable to goods, it is payable on goods that are eligible under Chapter 99 provisions, including temporarily imported goods of tariff item No. 9993.00.00. Carnets provide security for temporarily imported goods which are eligible for full duty and tax relief. Therefore if goods on a carnet are also applicable for surtax then a B3-3 must also be filed and the non-refundable surtax paid.
21 What are the rules regarding gifts valued at less than $60 that re brought into Canada under heading 9816?
According to Customs Notice 18-08 only the following numbers in chapter 98 are exempt from the application of the surtax:
|Chapter 98 - Customs Tariff Heading||Unofficial Description|
|98.01||Conveyances or containers of Chapters 86, 87, 88 or 89, engaged in the international commercial transportation of goods or passengers|
|98.02||Conveyances temporarily imported by a resident of Canada for international non-commercial transportation|
|98.03||Conveyances and baggage temporarily imported by non-residents|
|98.04 (other than tariff item No. 9804.30.00)||Travellers' exemptions|
|98.05||Goods imported by a former resident of Canada returning to Canada to resume residence|
As such the surtax would apply on the entire value for duty with no reduction of $60 applicable in such cases, should the goods in question be listed in the tables of either surtax order.
22 With respect to Surtax Orders, Paragraph 68(3) of the Customs Tariff states:
Non-application to goods in transit
(3) The President of the Canada Border Services Agency may relieve goods from payment of a surtax imposed by an order under subsection (1) if the President is of the opinion that
(a) before the coming into force of the order, the goods were purchased for importation in the expectation in good faith that subsection (1) would not have applied to those goods; and
(b) at the time that the order comes into force, the goods were in transit to the purchaser in Canada.
If an importer feels that the surtax should not apply based on this section of the tariff, and the surtax has not been paid, what are his next steps? If the surtax has been paid, should the usual steps for a refund be followed?
If an importer feels that the surtax should not apply based on the section of the tariff mentioned above, they should not do anything but keep any records, such as information on the transportation of the goods that may justify the non-payment of the surtax in case of a CBSA compliance verification. Where a surtax was paid incorrectly, the client should file a B2 either under section 74 of the Customs Act for a refund or subparagraph 53(2) of Customs Tariff to pay the surtax depending on the case.
Tip #58 – Be prepared for customs penalties and fines under AMPS
Never assume that the absence of an audit means you will never be audited. Penalties under AMPS (Administrative Monetary Penalty System) can be applied at the border at time of import (or export) and also post audit.