Cha. 5 - Legal Aspects of International Business - A Canadian Perspective, 4-153-181

CHAPTER 5
Canada's Response to Global

Rules: Domestic Rules for
Imports and Exports
LEARNING OBJECTIVES CHAPTER OUTLINE

Introduction 133
After reading this chapter you will understand
Domestic Legislation Governing Imports and Exports 133
• how Canada incorporates international trade treaties and their provisions
How to Import: Practical Considerations 140
into domestic law
Canadian Services for the Exporter 156
• the practical considerations when importing goods into Canada Chapter Summary 159
• what services are available from the government of Canada and its agencies Review Questions 159
to support and assist Canadian exporters Notes 159
Websites 161
List of Cases 161
Introduction
We now understand some of the more important provisions of the WTO, NAFTA, and CETA
agreements. As discussed in previous chapters, international agreements require domestic legis-
lation before they can have the force of law in Canada.
The first half of this chapter provides an overview of the most salient Canadian import and
export legislation as it reflects our international commitments and an overview of the regulatory
bodies in charge of administering this legislation. The second half will illustrate the processes of
importing goods.
Domestic Legislation Governing Imports and Exports

Canadian legislation governing imports and exports is influenced by a number of factors, which
include the following:
• protection of the health and safety of Canadian residents;

• maintenance of the economic well-being of Canada;
• compliance with the rules established under various international agreements, including
the WTO, NAFTA, and CETA; and
• compliance with treaty provisions providing for environmental protection.
This section highlights Canadian legislation that all importers and exporters should be
familiar with to be successful traders.
133
© [2020) Emond Montgomery Publications. All Rights Reserved.

134 Part I Public International Law
The Customs Act: Rules for Imports and Exports

The federal Customs Act 1 is Canada's primary legislation relating to imports and exports of
goods. The Customs Act authorizes the Canada Border Services Agency (CBSA) to regulate
the movement of exports, imports, and people and includes the rules for the collection of
duties and imposition of anti-dumping and countervailing tariffs. "Duties" means tariffs or
taxes imposed on the imported goods pursuant to the Customs Tariff,2 the Excise Tax Act,3
the Excise Act, 4 and the Special Import Measures Act. 5 The Customs Act operates in conjunc-
tion with other important acts with respect to the collection of tariffs and duties on imported
goods. The Customs Act is divided into seven major parts and creates a self-reporting legisla-
tive scheme regulating imports and exports. Pursuant to the following sections of the Customs
Act, the importer must
s 7. 1: provide true, accurate, and complete information to the CBSA regarding the goods;
s 12: report all imported goods;
s 13: present goods and truthfully answer any questions regarding same;
s 32: account for all goods and pay duties;
s 32.2: correct any incorrect declaration of origin, tariff classification, or value of the
goods.
s 35: mark goods to indicate origin; and
s 35: provide proof of origin of the goods.
These sections inform numerous regulations and documentary requirements for imports, as
illustrated later in this chapter.
The Customs Tariff

The Customs Tariff is the Canadian domestic legislation that provides for implementation of
GATT and our regional trade agreements' obligations. The duties on goods entering Canada are
levied in accordance with the Customs Tariff and its schedule, listing specific tariffs on different
classifications of goods. The Customs Tariff lists the duty obligations for imported goods based
on the tariff classification number assigned to a particular good. The tariff classification number
will be used to determine the rate of duty that will be applied by the CBSA to any particular good
upon entering Canada. The Customs Tariff provides for differing rates of duty on the thousands
of products and their origin as listed in Schedule A to the Customs Tariff The items are listed
with an identifying number and description according to the International Convention on the
Harmonized Commodity Description and Coding System (HS).6
Over 200 countries, including Canada, have adopted this uniform system of customs clas-
sification developed by the World Customs Organization (WCO). The WCO is an international
organization concerned with the technical aspects of customs law and administration. The or-
ganization is based in Brussels and has a membership of approximately 183 countries.
The WCO developed the HS. This system enables countries to bring tariff rates and trade
statistics into conformity with each other. The HS contains 21 sections divided into 99 chapters,
with 1,241 headings and 5,363 subheadings.
Canada Border Services Agency (CBSA): the Canadian federal agency responsible for providing integrated border services
Harmonized Commodity Description and Coding System (HS): a multilateral systemadopted by many countries to bring
tariff rates and trade statisticsintoconformitywith each other
World Customs Organization (WCO): an independent intergovernmental body whose mission isto enhance theeffectiveness
and efficiency of customs administrations

Chapter 5 Canada's Response to Global Rules: Domestic Rules for Imports and Exports 135
Under the HS, goods are grouped according to their raw material, industrial sector, and
degree of processing. Goods are identified by observable characteristics such as material corn -
position and not by the importer's intended use of the goods. An importer of goods into Canada
must consult these schedules to determine what duty will apply to her particular item.
Like the Customs Act, the Customs Tariff is divided into several parts; there are nine parts and
several divisions. Apart from the schedules of tariffs, the Customs Tariff deals with a number of
other significant customs issues for the importer, such as
s 16: rules of origin;

ss 17 & 18: rules pertaining to direct shipment and transshipment of goods;
s 19: marking of goods;
s 24: tariff treatment of goods;
s 53: special measures, emergency measures, and safeguards;
ss 83-113: rules with respect to the importation without full payment of duty, including duty
deferral and drawback and duty relief; and
s 115: refund of duty.
Excise Tax Act-Goods and Services Tax

Pursuant to the Excise Tax Act, all goods imported into Canada are subject to a goods and
services tax (GST) of 5 percent. The 5 percent will be applied to the value of the goods,
and the value of the goods will be determined based on the valuation provisions of the
Customs Act.
The Excise Tax Act should not be confused with the similarly named Excise Act, 2001,
which deals with taxation of spirits, wine, beer, tobacco, and cannabis products manufac-
tured in Canada and includes extensive control provisions relating to the distribution of these
commodities.
Special Import Measures Act

In Canada, we have taken the WTO provisions concerning dumping and subsidies and incor-
porated them into our own legislation, the Special Import Measures Act (SIMA).7 As discussed in
Chapter 2, the two primary remedies pursuant to the SIMA available to Canadian firms wishing
to protect their industry from unfair importing practices are anti-dumping (AD) and counter-
vailing duties (CVD). AD duties are duties imposed by an importing country over and above
the usual import duties when the goods are being dumped into the importing country. Dump-
ing refers to selling an imported good at a price lower than the price at which it is sold in the
exporting country. Countervailing duties are duties imposed by an importing country over and
above the usual import duties when the goods have been subsidized by the country in which
they are produced. The CBSA and the Canadian International Trade Tribunal (CITT) are jointly
responsible for the administration of SIMA.
Canadian Border Services Agency

The CBSA is the federal agency tasked with implementing and ensuring compliance with legis-
lative and regulatory provisions applicable to the movement of goods, people, and capital upon
entry into and exit from Canada. 8 The CBSA administers over 90 acts and regulations, including
Canadian International Trade Tribunal (CITT): the principal decision-making body for Canadian legislation affecting imports
and exports

the Customs Act, Customs Tariff, Excise Tax, Excise Tax Act, and generally performs the follow-
ing functions:
1. collecting duties and taxes on imported goods,

2. supporting economic competitiveness of business by administering trade legislation and
preparing foreign trade statistics,
3. protecting society and combatting fraud by detaining and removing people who
may pose a threat to Canada and interdicting illegal goods entering or leaving the
country, and
4. enforcing trade remedies and administering impartial redress mechanisms.
The Canadian International Trade Tribunal (CITTJ

The CITT is the principal decision-making body for Canadian legislation affecting imports and
exports. 9 Located in Ottawa, it has nine members, each appointed for a term of five years. It is an
independent quasi-judicial body with rules and procedures similar to those of a court oflaw but
tempered with more latitude than exists in regular courts. It has the authority to
• conduct inquiries into whether dumped or subsidized imports have caused, or are threat-
ening to cause, material injury to a domestic industry;
• hear appeals of CBSA decisions made under the Customs Act, the Excise Tax Act, and
SIMA;
• conduct inquiries and provide advice on economic, trade, and tariff issues referred by the
governor in council or the minister of finance;
• conduct inquiries into complaints concerning procurement under NAFTA, the Canadian
Free Trade Agreement, and the WTO Agreement on Government Procurement; and
• conduct safeguard inquiries to determine whether increased imports are causing, or
threatening to cause, serious injury to domestic producers.
Export Controls
Although Canada is generally an open market for the import and export of goods and ser-
vices, it does control the import and export of certain products such as endangered species,
protected cultural artifacts, uranium and nuclear-related material, and certain strategic and
military goods.10 Some regulations are also generated by Canada's bilateral and multilateral
trade agreements negotiated outside the WTO. The result is that numerous federal statutes
regulate the import and export of goods and services. Some of the more salient ones are
discussed below.
The principal legislation providing for export controls is the Export and Import Permits Act
(EIPA), 11 administered by the Trade Controls Bureau (TCB), 12 part of Global Affairs Canada.
Violations of the EIPA are punishable by fines and imprisonment; in some cases, both the cor-
porate exporter and its officers and directors may be prosecuted. The Act is enforced by the
CBSA and the RCMP, who may charge suspected offenders and may detain or seize goods
Canadian Free Trade Agreement {CFTA): aCanadian agreement, in effect since 2017, that isintended toreduce barriersto the
movement of persons, goods, services, and investments withinCanada
Export and Import Permits Act {EIPA): Canadian legislation providing for export controls
Trade Controls Bureau {TCB): the Canadian agency that administers the Export and Import Permits Act

suspected of not complying with the requirements. Also, there are two lists that are relevant to
regulating exports: the Export Control List (ECL)'3 and the Area Control List (ACL). 14
The Export Control List

The ECL is a list of goods that are subject to export controls and that require an export permit
prior to exportation. Exporters should always check the TCB's website before entering into ser-
ious contractual relationships because the list changes from time to time. At present it includes
the following:
• some agricultural products-for example, sugar and peanut butter;

• textiles and clothing;
• military and dual-use goods that may have a strategic purpose;
• firearms, ammunition, and explosives;
• nuclear energy materials and technology;
• missile, chemical, or biological goods for which proliferation is a concern;
• softwood lumber, unprocessed logs, pulpwood, and other forest products;
• goods of US origin and goods in transit;
• goods subject to a UN Security Council embargo or action; and
• goods subject to re-export controls by foreign governments.
The Area Control List

The ACL is a list of countries to which the export of any good or technology requires an export
permit. Exports to these countries are restricted on the basis that these states are considered
dangerous or aggressive or that they fail to respect internationally recognized human rights. At
present, only North Korea is on this list. Because the list can be changed by regulation on short
notice, an exporter should check the list periodically, particularly if contemplating trade with a
country that is under a regime with issues of terrorism or human rights violations.
Different Types of Export Permits

There are two types of export permits: an individual export permit (IEP) and a general export
permit (GEP) . The IEP authorizes specific goods to be exported to a specific destination by a
specific exporter. A GEP does not specify the exporter but provides a general authorization for
the export of specific goods to specific destinations. GEPs may also limit exports-for example, the
export of US-originating goods to Cuba, North Korea, Iran, and Syria, and to countries on
the Area Control List. It is important for exporters to comply with these requirements because
criminal penalties may be imposed for failure to comply.
Export Controls Imposed Pursuant to the United Nations Act and Special
Economic Measures Act
Canada imposes export sanctions against particular countries in order to comply with bind-
ing UN Security Council resolutions. The scope of each sanction depends on the specific UN
resolution; they do not always have the same requirements. Therefore, it is important to refer
Export Control List {ECL): a list of goods that are subject to export controls
Area Control List {ACL): alist of countries to which aCanadian export of any good or technology requiresan export permit
embargo: a prohibition against importing goods that originate inaspecified country
individual export permit (IEP): apermit for specified goods to be exported to aspecific destination by aspecific exporter
general export permit {GEP): ageneral authority for the export of specified goods to specified destinations

to the specific wording of the resolution. In addition to the sanctions imposed pursuant to UN
Security Council resolutions, Canada also imposes sanctions in accordance with the Special Eco-
nomic Measures Act (SEMA). 15 This allows Canada to impose sanctions where the international
community has not been involved. Like the sanctions imposed pursuant to the United Nations
Act, 16 sanctions imposed pursuant to SEMA are country-specific and do not necessarily follow
the same format. SEMA also gives the government authority to seize the assets of specific indi-
viduals or of a foreign state and to prevent any dealings between Canadian citizens and that state,
its agencies, residents, or nationals.
At the time of writing, Canada imposes sanctions under both pieces of legislation against
Central African Republic, Democratic Republic of Congo, Eritrea, Iran, Iraq, Lebanon, Libya,
Mali, Myanmar, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Tunisia, Ukraine,
Venezuela, Yemen, and Zimbabwe as well as against al-Qaida, the Taliban, and other inter-
national terrorist organizations. 17
Export Controls and US Legislation

Exporters should be aware that although the US government prohibits trade with Cuba, there
is no such prohibition in Canada. In fact, Canadian law prohibits a Canadian subsidiary of a
US corporation from complying with the extraterritorial application of US law restricting trade
with Cuba. Canada takes the position that extraterritorial application of laws adopted by other
governments is a violation of international law, and Canada's Foreign Extraterritorial Measures
Act18 prohibits a Canadian company from honouring such US legislation.
Import Controls
Canada generally operates an open trading regime with some exceptions. Import permits are
required for certain goods, and the restrictions on the importation of agricultural products
bear specific mention. Aside from that, a number of other regulations impose other regulatory
requirements on imports into Canada.
Import Permits
Import permits are required in a number of areas. Although the details of these areas will change
from time to time, the major ones are
• restricted goods, including weapons and hazardous wastes;

• carbon steel products and specialty steel products;
• clothing and textile products eligible for tariff preference levels established under NAFTA
or another trade agreement;
• wheat products and products of other grains, including barley and malt; and
• some animals and animal food products, including dairy products.
Import Controls on Agricultural Products

Import controls exist for Canadian agricultural goods in the dairy and poultry sectors.
Canada's dairy products, poultry (turkeys, chickens, and hatching chicks), and eggs industries
operate under the Supply Management System, an orderly marketing system that is designed
to match supply with demand. This system gives the Canadian government the ability to con-
trol supply from all sources- international as well as domestic. After the Uruguay Round,
Canada converted its existing agricultural quantitative import controls (quotas) to a trade

restrictive quantities (TRQs) system. The TRQs determine the tariff at which a specific agri-
cultural product will be imported based on how much of the specific good has already been
imported. Under the TRQs, imports are subject to low rates of duty up to a predetermined
limit-that is, until the import access quantity has been reached. 19 Imports over this limit are
subject to significantly higher "over access commitment" rates of duty.20
Canadian Regulatory Requirements Affecting Imports

Although the CBSA administers and enforces more than ninety acts, regulations, and inter-
national agreements that deal with import and export, numerous federal departments and agen-
cies have the authority to issue import permits and certificates and work in conjunction with the
CBSA. For example, the Canadian Food Inspection Agency (CFIA) issues import and export
permits for agricultural products, animals, and animal products, but the importer must still
declare the goods to the CBSA in accordance with the Customs Act. The CFIA administers the
Food and Drugs Act, Health of Animals Act, Plant Protection Act, Safe Food for Canadians Act,
Seeds Act, 21 and other legislation and their respective regulations. For example, it is the CFIA
that issues permits for dog imports, and the importation process can be viewed on their website
<https://www.inspection.gc.ca.>
Additionally, Canada has special packaging and labelling requirements, particularly for pre-
packaged goods. The relevant legislation is under federal jurisdiction and includes the Con-
sumer Packaging and Labelling Act, the Food and Drugs Act, the Hazardous Products Act, the
Trade-marks Act, the Pest Control Products Act, the Textile Labelling Act, the Customs Tariff,
and the Precious Metals Marking Act.22 Much of this legislation specifies the manner in which
basic information is to be placed on the product container, even down to specifying the letter-
ing size. Information concerning country of origin may also be required, as well as information
identifying the product's Canadian distributor. In addition, because Canada is bilingual, certain
information must be provided in both English and French. If a product is to be sold in Quebec,
the French version must be displayed no less prominently than the English version. Finally, any
non-food items may have to meet standards set by the Standards Council of Canada or Canadian
Standards Association (CSA). See Figure 5.1 for a sample nutrition label.
BOX 5.1 Customs Brokers Assisting Businesses

To deal with the complexity of the regulatory framework, many importers will use the services of
registered customs brokers. Customs brokers are trained professionals who assist the importer and
exporter in navigating the legislative rules for import and exporting in Canada. Customs brokers act
as agents on behalf of the importer and handle all the processes required by the CBSA with respect
to shipments of goods in and out of Canada. They help with clearing shipments through customs;
preparing international invoices, releases, and accounting forms; properly classifying goods; ensur-
ing labelling compliance; obtaining permits when required; and the payment of duties and taxes on
behalf of the importer. They may handle transportation needs as well. The CBSA licenses the customs
brokers and provides a list of Canada-wide registered customs brokers. DHL and FedEx are among the
companies that provide both shipping and customs brokerage services.
trade restrictive quantities (TRQs) system: asystem, imposed by agovernment, that limitstrade by restricting the quantities
of agood that may be imported or exported; thissystemwas implemented by Canadato replace quotas, which became impermis-
sible after the Uruguay Round agreements

FIGURE 5.1 Sample Nutrition Label
Bilingual labelling List of ingredients and allergens
Common name Net quantity
Country of origin Nutrition labelling

Fat I Llpides 1 g
Saturated I satures o. l g
+Trans I trans O g
Cholesterol / Cholesterol Omg
Date markings and storage Sweeteners
Sodium I Sodium 430 mg
instructions
Carbohydrate I Glucides 23 g
Fibre I Fibres 6 g Food additives
Sugars I Sucres 1 g
Name and principal place
Protein I Proteines 9 g
V1tam1n A I Vitamine A of business Fortification
Vitamin C I Vitamine C
Cak::ium I Calcium
Iron / Fer Irradiated foods Grades
Legibility and location Standards of identity
Most controls of exports originate with Global Affairs Canada; however, other governmental
departments may require authorizations for export of nuclear items, hazardous wastes, en-
dangered species, and cultural property. Current examples include Canadian Heritage and Mul-
ticulturalism, Health Canada, Agriculture and Agri-Food Canada, Natural Resources Canada,
Canada Post, Environment and Climate Change Canada, and Fisheries and Oceans Canada.
How to Import: Practical Considerations

Despite the availability of customs brokerages, it is important to understand the most salient
customs issues that will be faced by all commercial goods importers, irrespective of the product
they are bringing into Canada. Canada's primary import requirements23 can be broken down
into six sections, namely
1. identifying the goods and determining the correct tariff classification number for the goods,
2. determining the country of origin of the goods and identifying the correct tariff
treatment,
3. determining if GST /HST /PST applies,
4. determining the value of the goods,
5. determining whether labelling and marking requirements apply, and
6. determining whether products standards apply.
The discussion that follows will review in detail each of the six steps with reference to relevant
legislative sections and case examples.

Identifying the Goods and Tariff Classification

Before importing, it is critical to collect all relevant information regarding the goods to be
imported. This will include descriptive literature like sales brochures, purchase orders, product
composition information, a description of manufacturing processes, a list of parts if applicable,
and, whenever possible, product samples. This information assists in determining whether the
goods are permitted to be imported into Canada and, if so, the correct tariff classification num-
ber of the product. For example, certain goods are not allowed to be imported into Canada at
all. The list of prohibited goods includes child pornography and hate propaganda as well as less
obvious items such as used mattresses and some used automobiles. Other goods require import
permits, certificates, or inspections or are subject to other import controls. An importer needs
to determine whether or not the goods to be imported are subject to regulations, restrictions,
permits, or other requirements. The CBSA issues reference lists of some of the most commonly
imported commodities that may require permits and/or certificates. Identifying the goods at
the outset and consulting with relevant Canadian agencies is essential to successfully importing
goods into Canada.
Once it is clear that the goods are not banned in Canada, it is necessary to determine the
goad's tariff classification number. The goad's description will help identify the appropriate tariff
classification number, which in turn will determine the rate of duty that will be applied. After
reviewing all the product information, the importer will look at the applicable chapter, heading,
subheading and tariff item in the Customs Tariff As mentioned above, most trading nations use
the HS as the basis for classification of products to standardize product classification worldwide
and facilitate trade. The HS is a nomenclature within which goods are codified numerically
based on the category and subcategory of a particular commodity.
It is necessary to refer to the Customs Tariff to determine the ten-digit tariff classifi-
cation number and the applicable rate of duty. The first six digits are identical across all
states using the HS for that particular good. The first four digits correspond to the relevant
heading number, while the fifth and sixth digits identify the subheadings. Canada added
additional four digits to the tariff classification number for determining duty rates and for
statistical purposes.
For example, an importer is interested in bringing certified organic virgin olive oil in clear
glass bottles of 1.5 liters each from Spain for retail sale. The first place to look is at each chapter's
descriptions in the Customs Tariff Chapter 15 is called "Animal or vegetable fats and oils and
their cleavage products; prepared edible fats; animal or vegetable waxes:' Based on the product
description of virgin olive oil, it is clear that it is likely to be categorized within this chapter. The
next step is to accurately determine the correct heading and subheading within Chapter 15. This
is best illustrated by looking at the Tariff Item and Description of Goods columns in an excerpt
from the Customs Tariff (see Figure 5.2).
The first four digits of the ten-digit code refer to the chapter and the heading; the following
four digits refer to the subheading to allow for further identification. With reference to the ex-
ample above, the complete tariff classification number for the Spanish certified organic olive oil
is 1509.10.00.11. This is what it means:
15 is the chapter number;

09 is the heading for olive oil and its fractions;
10 refers to the olive oil subheading;
00 digits seven and eight are used by the CBSA for product/duty differentiation
domestically; and

FIGURE 5.2 Excerpt from Chapt er 15 of the Customs Tariff
15 - 3
CUSTOMS TARIFF - SCHEDULE
Tariff issl Description of Goods Unitof l MFN Applicable I

I Item 'I I
Meas. Tariff I Preferential Tariffs
1507.90.00 00 -Other KGM Free CCCT. LDCT, GPT, UST,
MT, CIAT, CT, CRT, IT,
PT, COLT, JT, PAT, HNT,
KRT, CEUT, UAT,
CPTPT: Free
15.08 Ground-nut oil and its fractions, wh ether or not refined, but not
chemically modified.
1508.10.00 00 -Crude oil KGM 4.5% CCCT, LDCT, GPT, UST,

MT, CT, CRT, IT, PT,
COLT, JT, PAT, HNT,
KRT, CEUT, UAT,
CPTPT: Free
1508.90.00 00 -Other KGM 9.5% CCCT, LDCT, UST, MT,

CT, CRT, IT, PT, COLT,
JT, PAT, HNT, KRT,
CEUT, UAT,
CPTPT: Free
GPT: 5%
15.09 Olive oil and its fractions, whether or not refined, but not chem ically
modified.
1509.10.00 -Virgin Free CCCT, LDCT, GPT, UST,

MT, CIAT, CT, CRT, IT,
PT, COLT, JT, PAT, HNT,
KRT, CEUT, UAT,
CPTPT: Free
- - - - -In containers of a capacity less than 18 kg:
11 - - - - - -Certified organic -----------------------------------------------·····---------------······-- KGM
12 - - - - - -Not certified organic __ ___ _____ ___ ___ ____ _ KGM
20 - - - - -In container sizes of 18 kg or more KGM
Source: © Canada Border Services Agency, 2019.
11 refers to whether the virgin olive oil is certified organic or not, and these last two digits
will be used for statistical purposes.
The first six digits will be the same for the same type of product from all countries that have
adopted the HS system.
As illustrated, without thorough product descriptions it would be impossible to identify the
correct classification. Identification can become even more challenging for manufactured prod-
ucts that consist of many parts; an importer will have to use additional tools for correct classifi-
cation. Several of these interpretive tools are discussed below.

General Rules for the Interpretation of the Harmonized System (GIRs)

The HS is governed by The International Convention on the Harmonized Commodity Descrip-
tion and Coding System, which Canada ratified and incorporated into the Customs Tariff Sec-
tion 10 of the Customs Tariff directs that classification of imported goods shall be determined in
accordance with the General Rules for the Interpretation of the Harmonized System (GIRs).24
The GIRs consist of six interpretive rules. Rules 1 to 4 are related and must be applied in
sequence. Rules 5 and 6 stand on their own to be applied as needed. The GIRs read, in part, as
follows:
1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for
legal purposes, classification shall be determined according to the terms of the headings and
any relative Section or Chapter Notes.
That is to say, Rule 1 states that the words in the section and chapter titles are to be used as
guidelines only, while the headings and any relevant chapter or section notes are the principal
consideration for HS classification. Most products are classified with reference to this rule alone,
without the need to proceed to Rules 2-6, which read in part
2. (a) Any reference in a heading to an article shall be taken to include a reference to that
article incomplete or unfinished, provided that, as presented, the incomplete or unfin-
ished article has the essential character of the complete or finished article. It shall also be
taken to include a reference to that article complete or finished (or failing to be classified
as complete or finished by virtue of this Rule), presented unassembled or
disassembled.
(b) ... The classification of goods consisting of more than one material or substance shall be
according to the principles of Rule 3.
To rephrase, Rule 2 means that unfinished, incomplete, unassembled, or disassembled goods

can be classified under the same heading as the same goods of a finished state, as long as they
have the essential character of the complete or finished good. For example, a bicycle missing its
seat would be classified the same as if it were a complete bicycle.
Legally, a product cannot be classified under two headings; however, a product's composition
may suggest that it should be classified under different headings. Rule 2(b) states that if a prod-
uct's classification may fall under two or more headings because it is composed of a combination
or mixture of substances or materials, then it is necessary to refer to Rule 3 to choose between
the alternate headings.
3. When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable
under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings
providing a more general description. However, when two or more headings each refer
to part only of the materials or substances contained in mixed or composite goods or to
part only of the items in a set put up for retail sale, those headings are to be regarded as
equally specific in relation to those goods, even if one of them gives a more complete or
precise description of the goods.
In other words, Rule 3(a) states that the more specific description of the product will drive the
selection of the correct heading. This means that a heading that names the actual product should
be used in preference to one that only names a category to which the product could belong. For
example, ginger tea could be classified as either ginger or tea. Ginger is the flavour of the tea,
while tea is the more specific description of the product and it should be classified as such for
tariff purposes.

(b) Mixtures, composite goods consisting of different materials or made up of different com-
ponents, and goods put up in sets for retail sale, which cannot be classified by reference
to Rule 3 (a), shall be classified as if they consisted of the material or component which
gives them their essential character, insofar as this criterion is applicable.
For example, a 3-in-l magnetic phone holder is considered to be a composite good

because it consists of an adhesive pad, a magnet, an iron base, and steel plates. To determine
the appropriate classification, it is necessary to refer to Rule 3(b), which says, in part, that a
good that is made up of different components that cannot be classified by reference to Rule
3(a) shall be classified based on the product's essential character. Since the phone holder is
incapable of performing its function without the magnet, it is the magnet that provides the
essential character to the good, and the classification will be based on the magnet: namely,
8505.11.00.00.
(c) When goods cannot be classified by reference to Rule 3 (a) or 3 (b), they shall be classi-
fied under the heading which occurs last in numerical order among those which equally
merit consideration.
When the essential character of the product cannot be determined under 3(a) or 3(b), the
product should be classified under the heading that occurs last in numerical order.
4. Goods which cannot be classified in accordance with the above Rules shall be classified
under the heading appropriate to the goods to which they are most akin.
This rule is often used as a rule of last resort and applies in particular to brand new items that
do not have their own subset yet.
Rule 5 specifically deals with goods in cases. Cases can be classified with the products they
contain. For instance, camera cases, musical-instrument cases, gun cases, necklace cases, and
similar containers, specially shaped or fitted to contain a specific product, suitable for long-term
use and presented with the articles for which they are intended, have to be classified based on
the products inside the case. However, where the case gives the product its essential character, it
would be the case that would have to be classified.
Rule 6 states that once a proper heading has been selected, the importer will need to follow
the same process for the subheading determination as well.
The World Customs Organization's Explanatory Notes to the HS

Additionally, section 11 of the Customs Tariff states that in determining correct classification,
regard shall be given to the WCO's Explanatory Notes to the Harmonized Commodity Descrip-
tion and Coding System (Explanatory Notes). The official interpretation of the HS is given in the
Explanatory Notes. The Explanatory Notes provide guidelines with respect to different product
classifications that have been finalized by the Harmonized System Committee and adopted by
the WCO Council. The Explanatory Notes assist the importer in determining the right tariff
classification. They constitute the official interpretation of the HS at an international level and
are critical to the correct and consistent classification of goods worldwide.
CBSA's Advance Rulings

The Customs Tariff, the GIRs, and the compendium of Explanatory Notes may be difficult to
navigate at times, in particular when the product is brand new. To address this issue and to

ensure a good is properly classified before shipment, pursuant to section 43 of the Customs Act,
an importer can request the CBSA provide a binding written decision with respect to tariff clas-
sification, value, or origin of a particular good. An importer needs to submit an advance ruling
request at least 120 days before the planned day of the importation of goods to allow the CBSA
to process the request in time. For an example, see Box 5.2 for an extract from an advance ruling
issued by the CBSA for a laser tag poncho to an importer. 25
CBSA Memoranda, Guides, and Custom Notices

The CBSA publishes a number of resources for importers and exporters. The Customs Notices
are used to inform importers and exporters about proposed changes to customs programs and
procedures, and the D-Memoranda are used to inform users about legislation, regulations, pol-
icies, and procedures the CBSA uses to administer customs programs. The D-Memoranda,
although not legally binding, provide a solid indication of how the CBSA will interpret the
tariff classification of different goods. The CBSA also publishes useful guides and brochures
that importers and exporters would be wise to consult before deciding to import or export a
particular product.
BOX 5.2 Tariff Classification Advance Ruling: Laser Tag Game Poncho
The following is an example of a CBSA advance ruling. The "This Chapter covers toys of all kinds whether designed for the
full version can be viewed at: amusement of children or adults. It also includes equipment for
https://www.cbsa-asfc.gc.ca/import/ar-da/2016/2016- indoor or outdoor games, appliances and apparatus for sports,
006170-eng.html. gymnastics or athletics, certain requisites for fishing, hunting or
shooting, and roundabouts and other fairground amusements.
This is in response to your request for an advance ruling on the Each of the headings of this Chapter also covers identifiable
tariff classification of Laser Tag Game Poncho. This product is parts and accessories of articles of this Chapter which are suit-
manufactured in Vietnam . ... able for use solely or principally therewith, and provided they
are not articles excluded by Note 1 to this Chapter. The articles
Product Description of this Chapter may, in general, be made of any material . . ."
The Laser Tag Game Poncho is made from 500Dx500D Cordura The Laser Tag Game Poncho, as an accessory or part to
PD Nylon with a 20TTPU C6 DWR backing, Poly filament webbing a laser tag game/ gaming system, is classified under tariff
with POM Plastic buckles, a PVC piping on the outside trim, EVA item 9504.90.00.
BV 35F foam padding on the inside and Flame Retardant CPA184,
100% Polyester lining for the inside of the battery pocket only. Decision
Section 10 of the Customs Tariff directs that classification of
Analysis and Justification imported goods shall be determined in accordance with the
The Laser Tag Game Poncho is to be worn by players engaged in General Rules for the Interpretation of the Harmonized System.
a game of laser-tag, played in an indoor arena. The poncho is fit- Section 11 of the Customs Tariff states that in interp reting the
ted, post importation, with the necessary game electronics and headings and subheadings, regard shall be had to the World
tools; hence its design and the sole purpose- indoor laser tag Customs Organization's (WCO) Explanatory Notes to the Har-
gaming. The poncho is not worn for adornment purposes and monized Commodity Description and Coding System....
does not have any decorative aspect to it. As such, it is not con- The Laser Tag Game Poncho as described/ presented is clas-
sidered to be an article of apparel nor is it a clothing accessory. sified under classification number 9504.90.00.19 in accordance
Legal Note 3 to Chapter 95 states that"Subject to Note l, parts with General Interpretative Rule 1 & 6, Canadian Rule 1, and by
and accessories which are suitable for use solely or principally with virtue of Legal Note 3 to Chapter 95, and General Explanatory
articles of this Chapter are to be classified with those articles:' Notes to Chapter 95.
This is further reinstated by World Customs Organization's
(WCO) Explanatory Notes to Chapter 9S which read, in part, that

Example of Laser Tag Game Poncho.
SOURCE: Text excerpts from Canada Border Services Agency, "Laser Tag Game Poncho" (2018), online:
<https://www.cbsa-asfc.gc.ca/import/ar-da/2016/2016-006170-eng.html>. © Canada Border Services Agency, 2019.
Canadian International Trade Tribunal ( CITT) and Federal Court of Appeal Decisions
Like the CBSA, the CITT plays an important role in administering and enforcing international
trade agreements and domestic legislation concerned with trade. As a quasi-judicial body, it can
hear issues and render decisions with respect to five key issues: Anti-Dumping Injury Inquiries,
Procurement Inquiries, Customs and Excise Appeals, Economic and Tariff Inquiries, and Safe-
guard Inquiries. The reports and decisions that the CITT publishes can assist importers not only
with their tariff classification but with respect to imports generally.
Decisions made by the CBSA with respect to tariff classification may be appealed to the CITT,
and CITT decisions may be further appealed to the Federal Court of Appeal (FCA). Decisions
from the CITT and the judgments from the FCA can have significant precedential value for an
importer facing similar issues to the ones in the decisions and judgments.
Consequences for Misclassification of Goods

Failure to properly identify the correct tariff classification number can be costly. The importer may
• pay a rate of customs duty that is significantly higher than the customs duty that would
be applied if correct tariff classification was determined;
• pay outstanding duty or tax on customs entry of the products;
• pay arrears plus interest;
• face additional monetary penalties for violation of the tariff classification rules;
• have the goods delayed and/or seized; and
• in rare cases, face criminal charges.

The difficulty of properly classifying goods is illustrated in the 2016 Supreme Court case
Canada (Attorney General) v Igloo Vikski Inc (see Box 5.3).
Rules of Origin of Goods

Rules of origin are the rules that govern the assignment of nationality to goods being imported.
It is critical to correctly identify the origin of the goods since duties, quotas, import controls, and
other customs requirements applied by the CBSA to the goods are based not only on the tariff
classification, but also on the origin of the product.
BOX 5.3 Case Highlight
Igloo Vikski's Hockey Gloves

Case Name and Tribunal that to resolve this issue, the product needs to be classified by
Canada (Attorney General) v Igloo Vikski Inc, Supreme Court of the main material that gives the product its essential charac-
Canada26 ter. Igloo's position was that the plastic in the gloves gave the
gloves their essential character and so should be classified as
Facts "other articles of plastics:'
Igloo Vikski Inc. (Igloo) imported six models of ice hockey goalie
gloves, comprising three models of "blockers" (designed to be Issue
worn on the same hand used by the goalie to hold his hockey What is the appropriate tariff classification for Igloo's hockey
stick) and three models of "catchers" (intended to be worn on gloves?
the goalie's other hand). Externally, the gloves are composed of
various types of textiles and plastics bound together by stitching. Decision
While the inner padding of the blockers consists mainly of plas- The Supreme Court weighed in on the interpretive issue,
tic, the inner padding of the catchers is composed of both plastic agreeing with CITI's interpretation and stating that to properly
and textiles. The CBSA classified the goods under heading No. classify goods, regard must be had to the GIR rules.
62.16 of the schedule to the Customs Tariff as "gloves, mittens and
Analysis/Application
mitts;' and Igloo appealed the classification to CITI. CITI, agree-
ing with the CBSA's original classification, argued that the hockey The GIR rules are to be followed in a hierarchical manner, where
gloves should be classified under the "gloves, mittens and mitts" subsequent rules need to be interpreted with reference to the
heading rather than under heading No. 39.26 as "other articles first. Additionally, the interpreter must move from one rule to
of plastics;' as claimed by Igloo. Igloo requested the gloves be the next only if the previous rule was inadequate. The Supreme
classified as "other articles of plastics" due to a more favourable Court was also unequivocal that significant deference should
duty rate. be afforded to the CBSA and the CITT, since these are the bod-
CITT relied solely on GIR Rules 1 and 2 to determine the ies that are tasked with interpreting highly technical domestic
appropriate tariff classification. Igloo argued that the classi- and international legislation, which is not normally seen before
fication must be resolved using GIR Rule 3(b), since in Igloo's the courts. This was the first time in history that the Supreme
interpretation, Rules 1 and 2 were not determinative of the Court was tasked with deciding on tariff classification. This case
classification issue. Using Rules 1 and 2(b) together along with serves as a cautionary tale for those importers considering
the Explanatory Notes, the CITT concluded that despite the mix challenging the CBSA or CITT rulings.
of textiles with plastics, the goalie gloves retained their main As the case illustrates, tariff classification can become com-
character, that of gloves. For CITI, Rules 1 and 2, together with plicated and importers would be wise to be well versed in the
the Explanatory Notes, were sufficient to reach this conclusion. rules, use additional interpretive tools, stay up to date on WCO
GIR Rule 3(b) becomes relevant only if Rules 1 and 2 together Explanatory Notes, continuously learn, and consider applying
with the Explanatory Notes do not provide an adequate clas- for advance rul ings. Additionally, it suggest s that, at t imes, it
sification rationale. Igloo argued that the hockey gloves can be may be worthwhile to cha llenge the CBSA and CITT rulings in
classified as articles of plastics and gloves simultaneously and an effort to reduce tariffs imposed on imported products.
rules of origin: the rules that govern the assignment of nationality to goods being imported

The general rule of origin under the Customs Tariff provides that a good originates in a
country if the whole of the value of the good is produced in that country. This is simple enough
when it comes to fruits, vegetables, beef, lumber, minerals, or other similar products that were
wholly harvested, born, or raised or extracted in one country. However, this general rule is sub-
ject to numerous other regulations under the Customs Tariff because many imported items are
composite products whose components are manufactured in various countries and assembled
and finished in others; some countries are Canada's preferential trading partners under certain
trade agreements while others are trading partners solely under the WTO agreements. The result
is myriad complicated regulations used for determining origin. These, of course, affect the docu-
mentation required for proof of origin.
Depending on the country of origin, the tariff will fall into one of two categories: preferential
and non-preferential. These two categories can be seen in the Customs Tariff example of olive oil
in Figure 5.2, in the two columns on the right-hand side entitled "MFN Tariff" and ''Applicable
Preferential Tariffs:'
MFNTariff
As discussed in Chapter 2, the MFN tariff is extended to all WTO members and is based on the
MFN clause in Article I of GATT. The rules of origin that govern the MFN tariff treatment are
set out in the regulation to the Customs Tariff called the Most-Favoured-Nation Tariff Rules of
Origin Regulations (MFN Regulations). 27 The MFN Regulations include a list of countries and
territories that are MFN beneficiaries.
Section 1 of the MFN Regulations specifies what an importer needs to show in order to qualify
for the MFN tariff treatment:
Goods originate in a country that is a beneficiary of the Most-Favoured-Nation Tariff if

(a) not less than 50 per cent of the cost of production of the goods is incurred by the industry
of one or more countries that are beneficiaries of the Most-Favoured-Nation Tariff, or by the
industry of Canada; and
(b) the goods were finished in a country that is a beneficiary of the Most-Favoured-Nation Tariff
in the form in which they are imported into Canada.
In other words, the goods need to come from a country that is on the MFN list of benefici-
aries, and the goods have to be wholly made or produced there or have at least 50 percent of the
cost of production incurred in a beneficiary country or in Canada. The goods must be finished
in an MFN beneficiary country in the form in which they will be imported into Canada.
Cost of production may include
(a) materials,
(b) labour, and
(c) factory overhead.
Unless a preferential tariff applies, the default tariff treatment for qualifying goods originating
from WTO member countries will be the MFN treatment.
Preferential Tariff
Canada has concluded numerous free trade agreements with other countries. Pursuant to these
agreements, Canada has agreed to impose more favourable, often lower, tariff rates than the
MFN rates for goods coming from some trading partners. The NAFTA and CETA rules of origin
are discussed in Chapters 3 and 4 respectively. Recall that, under Article XXIV of GATT, WTO
members are allowed to deviate from the MFN obligations and enter into customs unions and
free trade agreements that afford better treatment of goods for members of the regional trade
agreements than for all other WTO members.
The Customs Tariff includes a list of applicable preferential tariffs, which have reduced rates of
duty for goods based on Canada's trade agreements. Current agreements are described in Table 5.1.

TABLE 5.1 Applicable Preferential Tariffs in the Customs Tariff (as of June 2019)
Abbreviation
appearing in Customs
Tariff Schedule Tariff Treatment Agreement/ Arrangement
AUT Australia Tariff Most goods imported into Canada from Australia are subject to the
MFN tariff, although there are some preferential tariff rates (AUT) under
the Canada-Australia Tariff Agreement (CANATA) 1973
CCCT Commonwealth Caribbean Unilateral preferential treatment afforded by Canada to Caribbean

Countries Tariff countries under CARIBCAN, an econom ic and trade development as-
sistance program
CEUT Canada-Euro pean Union Tariff Canada-European Union Comprehensive Economic and Trade Agreement
CIAT Canada-Israel Agreement Tariff Canada-Israel Free Trade Agreement
COLT Colombia Tariff Canada-Colombia Free Trade Agreement
CRT Costa Rica Tariff Canada-Costa Rica Free Trade Ag reement
CT Chi le Tariff Canada-Chile Free Trade Agreement
GPT General Preferential Tariff WTO Agreement-General System of Preferences
HNT Honduras Tariff Canada-Honduras Free Trade Agreement
IT Iceland Tariff Canada-European Free Trade Association (EFTA) Free Trade Agreement
JT Jordan Tariff Canada-Jordan Free Trade Agreement
KRT Korea Tariff Canada-Korea Free Trade Agreement
LDCT Least Developed Country Tariff WTO Agreement-General System of Preferences
MFN Most Favoured Nation Tariff WTO Agreement
MT Mexico Tariff North American Free Trade Agreement/Canada-United States-Mexico

Ag reement
MUST Mexico-United Stat es Tariff North American Free Trade Agreement/Canada-United States-Mexico
Agreement
NT Norway Tariff Canada-European Free Trade Association (EFTA) Free Trade Agreement
NZT New Zealand Tariff Based on close commonwealth trading relationship. No FTA in place.
Rules of o rigin specified in the Australia Tariff and New Zealand Tariff
Rules of Origin Regulations
PT Peru Tariff Canada-Peru Free Trade Agreement
CPTPT Australia, Brunei Darussalam, Comprehensive and Prog ressive Agreement for Trans-Pacific
Chi le, Japan, Malaysia, Mexico, Partnership (CPTPP)
New Zealand, Peru, Singapore,
Vietnam
PAT Panam a Tariff Canada-Panama Free Tra de Ag reement
SLT Switzerland- Lichtenstein Tariff Canada-European Free Trade Association (EFTA) Free Trade Agreement
UAT Ukraine Tariff Canada-Ukraine Free Trade Ag reement
UST United States Tariff North American Free Trade Agreement/Canada-United States-Mexico
Ag reement

Each trade agreement has specific rules-of-origin requirements that a country must comply
with to benefit from a preferential duty rate.
For example, the Canada-European Union Comprehensive Economic and Trade Agreement
(CETA) essentially eliminates the customs duties on all imports from the European Union with
the exception of a few agricultural goods. Entitlement to the CEUT tariff treatment is deter-
mined in accordance with the rules of origin set out in CETA's "Protocol on rules of origin and
origin procedures:'2s
Proof of Origin
Pursuant to section 35.1 of the Customs Act, proof of origin must be furnished for all imported
goods. The importer, to benefit from the preferential tariff, must submit proof of origin for the
specific trade agreement at the time of importation. Proof of origin may be in the form of a
commercial invoice, a Form A, certificate of origin, an exporter's statement of origin, or any
other documentation that indicates the country of origin of the goods.29 Proof of origin is like a
passport for the importer's goods, allowing her to benefit from certain of its features.
For example, to use the Canada-Costa Rica Free Trade Agreement and benefit from the CRT
preferential tariff, an accurately prepared certificate of origin is required (see Figure 5.3).
To summarize, to determine the rate of customs duty that will be applied to imported goods,
the goods must be
1. classified according to the classification provisions of the Customs Tariff, the GIRs, legal
notes, explanatory notes, advance rulings, and other supplementary materials; then
2. once the correct tariff classification number is determined, the importer must identify
the country of origin of the goods; then
3. using the tariff classification number and the country of origin, the importer will iden-
tify the applicable duty rate by referring to the Customs TariffSchedule and the appropri-
ate acronym and finding the tariff rate identified by a percentage or, if it's duty-free, by
the word "free:'
Determining the Value of the Goods Being Imported

While customs duty rates are determined based on the tariff classification and the origin of
the goods, the duties and taxes are calculated based on the value of the goods. For example,
you import wine from Country Y to Canada and, based on the tariff classification and product
origin, the MFN rate of duty is 10 percent. If the value of one bottle of wine is $15, you will be
paying $1.50 in duties ($15 X 10% ad valorem = $1.50). There are valuation rules to establish
that the bottle of wine is in fact $15. Understanding the valuation methods is important for all
importers to not only ensure compliance but also to arrange import transactions in such a way
as to declare the lowest legally acceptable value for the imported goods and therefore pay the
lowest legally acceptable duty.
Dutiable Value of the Goods

Canada's valuation provisions in the Customs Act are based on the Agreement on Implementa-
tion of Article VII of the General Agreement on Tariffs and Trade 1994 (Valuation Agreement),
which forms part of the WTO Agreement. By virtue of being a WTO member, Canada is bound
by the Valuation Agreement, and it has incorporated it into domestic law in the form of the
Customs Act's sections 47 -53 and Valuation for Duty Regulations30 and Direct Shipment of Goods
Regulations.31 The Valuation Agreement establishes a single system for valuation of imported
goods that is fair, uniform, and neutral. The Valuation Agreement reflects the need for valuations
to be based on the actual price of the goods, as this provides greater predictability, stability, and

FIGURE 5.3 Certificate of Origin
Canada Border Agence des services Restore Help

l+I Services Agency frontaliers du Canada Protected 8 when completed
CERTIFICATE OF ORIGIN
Canada-Costa Rica Free T rade Agreement ,,.._i_n.•tru
_ ctl
_ o.n.•_ . .
Please p ri nt o r type
1. Exporte~s name and address: 2. Blanket period :
Telephone: Fax:
~onth I
Doy Year Doy Month Year
Free zone regime Yes No

From:
I I I I I I I To: I I I I I I I I I
E-Mail:
Tax identification number:
3 . Producer's name and address: 4 . Importer's name and address:
Telephone: Fax: Telephone : Fax:
E-Mail: Free zone regime Yes No E-Mail:
Tax identification number: Tax identification number:
5. 6. HS Tariff 7 . Preference 8. 9. 10.

Description of good(s) classification no. criterion Producer RCV Other
11. Observations:
I certify that:
- The information in this document is true and accurate and I assume the responsibil ity for proving such representations. I understand that I am liable for any
false statements or material omissions made on or in connection w ith this document.
- I agree to maintain, and present upon request, documentation necessary to support this Certifica te , and to inform , in writing, a ll persons to whom the
Certificate was given of any changes that would affect the accuracy or validity of this Certificate.
- The goods originate in the territo ry of one or both Parties, and comply with the origin requirements specified for those good s in the Canada - Costa Rica Free
Trade Agreement, and unless specifically exempted in Article IV. 11 or Annex IV. 1, have not undergone any further production or any other operation outside
the territories of the Parties.
This Certificate consists of oaaes, includina all attachments.

12. Authorized signature: Company:
Name: Title :
Date ~
Day Month Year
T elephone:
IFax
I I I I I I I I I
8 246 E (16) BSF317 E
Canada
Source: CBSA, onlin e (pdf): <https:/ / www.cbsa-asfc.gc.ca/publications/ fo rms-formulaires/ b246-eng.pdf>.
© Canada Border Services Agency, 201 9.

transparency for trade worldwide. A uniform system evens the playing field for the importers
internationally. Since most rates of duty are ad valorem, the customs value is essential to confirm
the duty to be paid on an imported good.
The Valuation Agreement precludes the use of arbitrary or fictitious values and attempts to
use actual transaction values as the basis for customs valuation whenever possible.
The transaction pricing system Canada has adopted provides for six methods of determining
the value for duty: transaction value, transaction value of identical goods, transaction value of
similar goods, deductive value, computed value, and residual value.
Transaction Value
The transaction value method is the primary valuation method. It is used to value approxi-
mately 75 percent of all imports. The transaction value is the price actually paid or payable for
the goods-that is, the invoice price. Thus, it is not suitable for use in non-arm's-length trans-
actions, because pricing may be dictated by the intercorporate relationship rather than the mar-
ket. In other words, the transaction value must reflect the price at which a foreign vendor would
sell a product to an unrelated purchaser in Canada. Nor is this method suitable for goods on
consignment or under lease. There is also provision for adjustments to this value to account for
costs incurred by the importer but not included in the invoice, such as royalties, licensing fees,
packing costs, and commissions. For example, pursuant to section 48(S)(a)(ii), packing costs are
to be included in the transaction cost.
Each valuation method has its own unique requirements. Its principal requirements, which stem
from the wording of section 48 of the Customs Act, are discussed below. Section 48 reads in part
48 (1) Subject to subsections (6) and (7), the value for duty of goods is the transaction value of the
goods if the goods are sold for export to Canada to a purchaser in Canada and the price paid or pay-
able for the goods can be determined and if
(a) there are no restrictions respecting the disposition or use of the goods by the purchaser
thereof. ..
(b) the sale of the goods by the vendor to the purchaser or the price paid or payable for the
goods is not subject to some condition or consideration, with respect to the goods, in respect
of which a value cannot be determined;
(c) ... ; and
(d) the purchaser and the vendor of the goods are not related to each other at the time the goods
are sold for export or, where the purchaser and the vendor are related to each other at that
time,
(i) their relationship did not influence the price paid or payable for the goods, or
(ii) the importer of the goods demonstrates that the transaction value of the goods meets
the requirement set out in subsection (3) ....
Determination of transaction value

(4) The transaction value of goods shall be determined by ascertaining the price paid or payable
for the goods when the goods are sold for export to Canada and adjusting the price paid or pay-
able in accordance with subsection (5). 32
First, pursuant to section 48(1), an importer needs to determine if the goods were imported
to Canada as a result of a sale for export to Canada. Generally, when a purchaser who is
located in Canada contracts for the purchase of goods with a foreign vendor and the goods
are then shipped to Canada to the purchaser, this transaction is a sale for export to Canada in
non-arm's-length transaction: atransaction in which the parties are not independent from each other; for example, related
companies are not at arm's length and may arrange transfer pricing that does not refiect market forces

accordance with the Customs Act. Second, the goods must be imported as the result of a sale
agreement between the purchaser in Canada and a vendor. A sale requires a transfer of owner-
ship of goods for a monetary amount. Here are some examples of situations that would not be
considered a sale for export to Canada:
• goods imported on consignment,

• leased goods,
• barter transactions,
• trade-ins, and
• goods invoiced at no charge.
This may seem straightforward; however, the questions concerning whether a transaction is
in fact a sale for export, whether someone is for the purpose of the legislation a Canadian pur-
chaser, and who the vendor is may get very complicated.
For example, a purchaser located in Canada (Purchaser A) enters into a contract with a foreign
vendor (Vendor B) for the purchase of goods. Vendor B then orders the goods from a foreign sup-
plier (Vendor C). Vendor C ships the goods to Purchaser A directly. In this example, the sale for
export to Canada is between Vendor A and Vendor B, and the CBSA will only look at their contract
and at what Purchaser A paid to Vendor B-not the sale between Vendor Band Vendor C. Only
the transaction that causes the international transfer of the goods to Canada qualifies for the trans-
action value method of determining customs duty, since the goods need to arrive from abroad and
it is the person in Canada who needs to set off the chain of events. This issue of who the purchaser
and vendor are came up in the Jockey Canada case, discussed in Box 5.4.
Jockey Canada
Case Name and Tribunal Issues
Jockey Canada Company v CBSA (Canadian International Trade Is the parent company or the foreign supplier the vendor? If the
Tribunal, 2013) 33 parent company is found to be the vendor, can the transaction
value be used for the purpose of determining the dutiable
Facts value of the goods, or will it be considered a non-arm's-length
Jockey Canada Company (JCC) is a subsidiary of Jockey Inter- transaction?
national Inc. (Jll). JCC imported goods from non-related Asian
companies and related Caribbean companies by providing sales Decision
forecasts to Jll, who issued purchase orders to the suppliers in The goods were purchased from Jll by JCC, and the wholesale
the name of JCC. The goods are shipped to JCC with the invoice. value less 35 percent was an acceptable transaction value that
On some of the invoices, JCC is shown as a consignee rather than was not affected by the relationship between Jll and JCC.
a buyer. In all cases, JCC assumed the risk and title to the goods
at the time of export, and JCC was the importer and paid duty Analysis/Application
and GST to customs. However, JCC did not pay the suppliers JCC paid the purchase price of the goods to Jll. There was no
directly for the goods; they were paid by Jll. JCC paid Jll for the evidence that JCC had bought the goods or paid anyone else
goods purchased-an amount equal to the Canadian wholesale for the goods other than Jll. As to whether the transaction
price less 35 percent, which was the transfer price stipulated in value could be used, the CITT found that the transfer price es-
the sales and distribution agreement between Jll and JCC. tablished between JCC and Jll was not affected by the relation-
JCC claimed that the value for duty should have been based ship between the parties. The price was based on a method
on the amount on the foreign suppliers' invoices, but the CBSA recommended by the OECD and satisfied the Canada Revenue
determined that it should be based on the amount that was Agency's arm's-length principle.
paid by JCC to Jll pursuant to their sales and distribution agree-
ment. JCC appealed this decision to the CITT.

To qualify as a "purchaser in Canada" an importer needs to be (1) a resident, (2) a person who
is not a resident in Canada but who has a p ermanent establishment in Canada, or (3) a person
who neither is a resident in Canada nor has a permanent establishment in Canada but w ho
imports goods for which the value for duty is being determined.
Once the purchaser-in-Canada and sale-for-export aspects are confirmed, the next step is
to determine the price paid or payable by the importer. Subsection 45(1) of the Customs Act
defines price paid or payable as the aggregate of all payments made or to be made, directly or
indirectly, in respect of the goods by the purchaser to or for th e benefit of the vendor. Defining
price paid or payable this way ensures that the sum of all payments a purchaser makes to the
vendor is included in the transaction value, even when the payments are not included in the
price shown on the commercial invoice or in the contract for the imported goods.
Factors the importer may have to consider in determining the price paid or payable include
• the invoice price,

• storage expenses,
• credits for earlier transactions,
• warranty payments,
• settlement of a debt on behalf of the vendor,
• price escalation clauses, and
• export duties and taxes.
The issue of wh eth er research and development costs should be added to the dutiable value
came up in the Skechers Canada case (see Box 5.5) .
Skechers USA Canada Inc.

Case Name and Tribunal Issues
Skechers USA Canada Inc v Canada (Border Services Agency) Must the dutiable value of the goods include research and de-
2015 FCA 5834 velopment costs? Are R&D payments made "in respect of" the
imported footwear?
Facts
5kechers appealed CITT's decision regarding the dutiable value Decision
of footwear imported into Canada between 2005 and 2011 to R&D payments are indeed "in respect of" the shoes and must
the Federal Court of Appeal. Skechers USA designs the foot- be included in the dutiable value of the shoes. Skechers' appeal
wear, and the shoes are manufactured offshore by a third party. was dismissed.
Skechers Canada purchased the footwear from Skechers USA,
and the purchase price incl uded the cost of manufacturing by Analysis/Application
the third parties, transportation cost to the United States, ware- The phrase "in respect of" is broad and will be factually specific
housing, and an arm's-length profit. After conducting an audit, in each case. Skechers did not discharge its burden of demon-
the CBSA determined that the dutiable value of the goods strating that the payments were not "in respect of" the shoes.
must also include research and development (R&D) costs, be- Despite t he company's claim that the research and develop-
cause extensive market R&D is key to ensuring that Skechers ment was done with an eye to developing the brand, the Fed-
keeps up with fashion trends. This research and development eral Court of Appeal agreed with CITT's decision. CITT found
work includes the following: analyzing fashion, lifestyle, music, that it was indeed done for the specific purpose of developing
television, fashion, sports, and media trends; consulting with the footwear itself. The CITT also found that the shape, texture,
customers; and developing and refining prototypes. Skechers and colour of the shoes were the result of the R&D and design
argued that these payments are not "in respect" of the goods process.
but rather are in respect of certain "intangibles" and that they
should not be included in the purchase price.

These are the three requirements that must be met before the transaction value method can
be used: (1) there must be a sale for export, (2) there must be a purchaser in Canada, and (3) the
price paid or payable must be ascertainable. These principal requirements for using the trans-
action value method to appraise the value of goods illustrate the complexity of the valuation
processes generally.
The transaction value method is the most important valuation method and must be applied
first. Only if the customs value cannot be determined on the basis of the transaction value will
one of the subsequent methods be used, namely
• the transaction value of identical goods,

• the transaction value of similar goods,
• the deductive value method,
• the computed value method, and
• the residual value-fall-back method.
The above valuation methods must be used in hierarchical order.
Transaction Value of Identical Goods

When the transaction value method is not suitable, the first alternative is to use the transaction
value of identical goods. The sales used as a comparative base must be export sales and not sales
in the domestic market of the country of export. For this method, the CBSA will use information
about the customs value of identical or similar imported goods by the same or other vendors.
Transaction Value of Similar Goods

Where there are no transactions involving identical goods, the transaction value of similar goods
is used.
Deductive Value
The deductive value is obtained by starting with the resale price in Canada and working back-
ward to an export price for the good, relying solely on information available in this country.
This method bases the value of the goods on the first resale price of the product in Canada with
certain deductions for profits, administrative costs, duties, taxes, and expenses incurred.
Computed Value
The computed value takes the costs of producing the goods and allows an amount for profit and
for general expenses such as overhead. This method requires the foreign manufacturer to pro-
vide information on the production costs of the goods.
Residual Value
When it is not possible to value goods under any of the above methods, the method that is most
suitable in the circumstances is flexibly applied, but only on the basis of information available in
Canada. This is the goad's residual value.
Determining if GST Is Payable

Once the value of the goods is established, the importer can calculate the ad valorem tax on
the product and then assess whether GST or other taxes are payable on the imported goods.
The majority of imported goods will be taxable at a rate of 5 percent pursuant to the Excise Tax
Act. There are, however, some exceptions. For example, certain importations such as prescrip-
tion drugs, medical and assistive devices, basic groceries, and agriculture and fishing goods are
non-taxable.

To properly estimate how much duty and taxes will be payable, the importer needs to obtain
the value for duty in Canadian dollars and the customs duty rate. The GST will be payable on the
amount of the value for tax purposes as illustrated below:
$100.00 (value for duty) X 5% (customs duty rate) = $5.00 (customs duty).
$100.00 (value for duty) + $5 (customs duty) = $105 (value for tax).
$105 X 5% (GST) = $5.25 (GST).
Total of customs duty and GST payable (in Canadian dollars) is $5 + $5.25 = $10.25.
Determining Whether Labelling and Marking Requirements Apply

There is a host of laws governing labelling and marking requirements. Importers should not
confuse the requirement for country of origin marking with labelling requirements of other
government departments. The Customs Act and the Customs Tariff Act require that certain goods
be clearly marked with the country of origin. Usually, the foreign exporter or producer applies
the country of origin marking. However, the final responsibility lies with the Canadian importer
for ensuring that imported goods comply with marking requirements at the time they import
the goods.
While the CBSA enforces the Customs Tariff Act provision regarding the country of origin
markings, Agriculture and Agri-Food Canada, Industry Canada, and other government bodies
oversee the correct labelling of products.
Determining Whether Products Standards Apply

Importers must do their due diligence with respect to product standards as well. For example,
imported commercial and household appliances and electronic goods require certification by
the Canadian Standards Association (CSA). Standards are designed to protect the public by
addressing or preventing dangers to health and safety. The CSA oversees standards that relate
to hygiene, sizing, electricity, electronics, technical specification, construction, and other areas.
Imports Summary
Some of the most critical steps for successful imports are product identification, classification,
adherence with rules of origin, valuation, and compliance with other relevant legislation. The
more knowledgeable the importer is with respect to all customs laws and regulations, the better
he can strategize to expedite the process, reduce risks, and minimize the duties and taxes payable.
Canadian Services for the Exporter

An exporter of Canadian goods would have to review the relevant laws and regulations of the
target market and follow a process for exporting products from Canada that is similar to the one
an importer would have to follow when bringing goods into Canada.
Recognizing the difficulty a Canadian exporter may face in navigating international treaties
and foreign laws, the government of Canada offers a number of services to those interested in
expanding their businesses internationally.
The Canadian Trade Commissioner Service

The Canadian Trade Commissioner Service (TCS) works with provincial and municipal govern-
ments, industry associations, educational institutions, and the private sector to provide support
to Canadian exporters. There are TCS officers in Canadian embassies and consulates all over the
world, and they provide core services that include the following:
• assessments of potential prospects in the target market;

• searches for qualified contacts in the target market;
• information on foreign organizations, customers, and competitors;

• foreign visit information, including information on hotels, business support services,

translators, and local transportation;
• face-to-face briefings with Canadian exporters in the target destination to discuss an
exporter's needs; and
• troubleshooting assistance (but officers do not act as brokers, agents, or legal counsel for
a Canadian exporter).
Export Development Canada

Export Development Canada (EDC) is a Canadian Crown corporation created under the Export
Development Act whose purpose is to provide trade-finance services to support Canadian
exporters and investors. It is estimated that 90 percent of EDC's customers are smaller busi-
ness enterprises. EDC provides a number of products and services, some of which are accounts
receivable insurance, single buyer insurance, contract frustration insurance, performance se-
curity insurance, political risk insurance, and other products. EDC also provides financing in
the form of its export guarantee program, foreign buyer financing, foreign investment financing,
supplier financing, structured and project financing, and domestic financing.
Accounts Receivable Insurance

Accounts receivable insurance is available to Canadian companies of any size operating in
Canada in any sector of the economy. It covers up to 90 percent oflosses for all accounts receiv-
able. Risks that may be insured against include buyer bankruptcy or default, buyer rejection of
goods shipped, cancellation of contract by the buyer, war or insurrection in the buyer's country,
government cancellation of import or export permits, and foreign-exchange-control problems
preventing buyer payment. The insurance premiums vary with the degree of risk, the destina-
tion, and the length of the credit term.
Single Buyer Insurance

Single buyer insurance is accounts receivable coverage, providing protection for up to 180 days,
for losses that arise from export sales to a single US or foreign customer and that are a conse-
quence of one of the following factors: buyer bankruptcy or default, payment delays arising from
blocked funds or transfer difficulties, war or insurrection in the buyer's country, or government
cancellation of import or export permits.
Contract Frustration Insurance

Contract frustration insurance covers up to 90 percent of an exporter's losses if they result from
the following: buyer bankruptcy or default, contract cancellation, payment delays arising from
blocked funds or transfer difficulties, war or insurrection in the buyer's country, or government
cancellation of import or export permits.
Performance Security Insurance

Performance security insurance covers up to 95 percent of an exporter's losses if a foreign buyer
makes a wrongful call on an irrevocable letter of credit or letter of guarantee.
Political Risk Insurance

Political risk insurance protects an exporter's overseas assets-such as equipment, warehouses,
and manufacturing operations-from the political actions of a sovereign state and is not limited
Export Development Canada (EDC): a Canadian Crown corporationthat provides trade-finance services to support Canadian
exportersand investors

to specific transactions. Examples of political risks that may be covered are breach of contract,
non-payment by a sovereign contracting party, expropriation or repossession of physical assets,
political violence or terrorism, currency-conversion problems, or the inability to transfer hard
currency.
Canadian provinces also aid exporters. For example, Alberta Economic Development and
Trade
• provides international market intelligence to export-ready Alberta companies;

• showcases Alberta's technologies, products, and services;
• facilitates networking events and programs and contact introductions in priority markets;
• promotes Alberta's investment opportunities to targeted companies in priority markets;
• helps Alberta companies access foreign markets; and
• leads Alberta's participation in domestic and international trade negotiations.
CRITICAL ANALYSIS: Business Law and Ethics
The Collapse of Rana Plaza in Bangladesh

In April 2013, the deadliest garment factory accident in hist- negotiate commercial terms with suppliers that ensure it is fi-
ory occurred in Dhaka, Bangladesh, when Rana Plaza, an eight- nancially feasible for the factories to maintain safe workplaces;
storey building housing a factory, a bank, and apartments, and provide funding for the activities of the programs, with
collapsed, killing 1, 132 people and injuring 2,S00. 35 More than each company contributing its equitable share of the funding
half the workers were women, and, because the building had up to a maximum contribution of $SOO,OOO per year.
nursery facilities, many children were also victims. The cause of The Accord impacts over 2.S million employees in
the collapse was found to be a failure to follow building codes Bangladesh. Since its signing, engineers have inspected more
in construction. The top four floors of the building were con- than 2,000 factories and identified over 1S0,000 fire, electrical,
structed without permits.36 and structural hazards. Some 8S percent of the safety hazards
Bangladesh has one of the largest garment industries in identified during initial inspections across all Accord factor-
the world37 and is the second largest exporter of apparel after ies have been fixed, 1SO Accord factories have completed the
China,38 in large part because of the extremely low cost of safety remediation, and 8S7 Accord factories have completed
labour there. Many of the clothes that were being produced more than 90 percent of the remediation.
in the factory were made for Western retailers, among whom The Accord secretariat and its signatories suggest that only
was Canada's Joe Fresh label, carried by Loblaws and Joe Fresh changes to domestic laws and their enforcement by Bangla-
stores. Western retailers are interested in seeking production deshi authorities will ultimately solve the issue of unsafe fac-
facilities in jurisdictions with low wages largely as a result of tories. However, until that is possible the Accord, together
demand from Western consumers, who have become accus- with Bangladeshi authorities, will mitigate future catastrophes
tomed to low-cost trendy clothing from retailers like Wal mart, through continued inspections, remediations, safety commit-
Target, American Eagle, and H&M and do not concern them- tee training programmes, and complaints mechanisms.41
selves with the conditions in which these products are pro-
duced.39 Many of these jurisdictions either do not have robust Critical Analysis Questions
workplace safety regulations or fail to enforce them w here they 1. You have recently launched a small clothing retail
do exist. business in Vancouver, importing clothing from
Following the collapse of the factory, public outcry, and overseas, and you are keen to build a reputation as an
damage to the collective image of the garment industry, ap- ethical trader. Your main concern is ethical sourcing.
proximately 200 apparel brands and retailers, including Lob laws, What can you do to ensure your business scores high on
and trade unions entered into a legally binding agreement, ethics?
Accord on Fire and Building Safety in Bangladesh (Accord).40 The 2. What is the role of business in ensuring health and
Accord is designed to improve health and safety conditions in safety standards in jurisdictions that either do not have
the Bangladeshi garment industry. Each signatory brand name robust workplace safety regulations or fail to enforce
and retailer joining the Accord must disclose the list of their them where they do exist?
Bangladeshi factories; ensure their factories participate in the 3. How can the Canadian government and businesses work
Accord inspections and remediation and workplace programs; together to improve ethical standards for importers?

CHAPTER SUMMARY
In this chapter, we discussed: The Customs Tariff lists tariff items according to the
Harmonized Commodity Description and Coding
How Canada incorporates international trade treaties
System (HS).
and their provisions into domestic law.
Rules of origin govern the assignment of nationality to
WTO and regional trade agreements impose rules on goods being imported; tariff rates are prescribed accord-
Canada's export and import regimes. ing to the nationality assigned.
• In Canada, the major federal government legislation re- Canada's transaction pricing system has six methods of
lating to export and import rules is found in determining the value for duty.
- the Export and Import Permits Act,
What services are available from the government of
- the Canada Border Services Agency Act,
Canada and its agencies to support and assist Canadian
- the Customs Act,
exporters.
- the Customs Tariff,
- the Special Import Measures Act (SIMA), • The Canadian Trade Commissioner Service works to sup-
- the Excise Tax Act, and port Canadian exporters.
- the Excise Act. Export Development Canada is a Canadian Crown cor-
poration that provides trade-finance services to support
The practical considerations when importing goods into
Canadian exporters.
Canada.
• Tariff classification is a critical step in successfully im-

porting products.
REVIEW QUESTIONS
1. In what circumstances do you need a permit to 5. What types of goods are subject to restrictions or
export goods from Canada? How would you ensure limitations when being imported into Canada?
that your information on permit requirements is
6. What is a tariff classification?
current?
7. Why is the correct tariff classification so critical?
2. What is the difference between the export control list
and the area control list? 8. Classification in the Harmonized Tariff System is
governed by what interpretive rules?
3. What is the difference between an individual export
permit and a general export permit? 9. Why is proper country of origin identification
significant?
4. Describe the process by which the CBSA determines
what duties apply to goods being imported into 10. Describe two services provided by the Canadian
Canada. government to assist Canadian exporters.
NOTES
1. RSC 1985, c 1 (2d Supp). 6. Harmonized System (23 August 2012), online: World
Customs Organization <http://www.wcoomd.org/ en/
2. SC 1997, c 36.
topics/nomenclature/ overview.as px>.
3. RSC 1985, c E-15.
7. RSC 1985, c S-15.
4. RSC 1985, c E-14.
8. (Last visited 3 May 2019), on line: Government of
5. RSC 1985, c S-15. Canada <https://www.cbsa-asfc.gc.ca/ menu-eng.
html>.

9. (1 February 2017), on line: Government of Canada Services Agency <https://www.cbsa-asfc.gc.ca/

<https://www.citt-tcce.gc.ca/ en/ about-the-tribunal/ import/ ar-da/ 2016/2016-006170-eng.html>.
what-we-do.html >.
26. (2016] 2 SCR 80.
10. Export and Import Permits Act (EIPA), RSC 1985, c E-19.
27. SOR/ 98-33.
11. Ibid.
28. Text of the Comprehensive Economic and Trade
12. Formerly the Export and Import Controls Bureau Agreement-Protocol on rules of origin and origin
(EICB). Trade Controls Bureau (last modified 6 procedures (3 October 2017), on line: Government of
February 2014), on line: Global Affairs Canada Canada <https://www.international.gc.ca/ trade-
< https://www.international.gc.ca/ controls-co ntroles/ commerce/ trade-agreements-accords-commerciaux/
about-a_propos/tid.aspx?lang=eng>. agr-acc/ceta-aecg/text-texte/ Pl .aspx?lang=eng>.
13. SOR/ 89-202. 29. "Memorandum Dl 1-4-2: Proof of Origin of Imported

Goods" (6 June 2017), on line: Canada Border Services
14. SOR/ 81-543.
Agency <https://www.cbsa-asfc.gc.ca/ pu blications/
15. SC1992,c17. dm-md/ dl l /dl l-4-2-eng.html>.
16. RSC 1985, c U-2. 30. SOR/ 86-792.

17. "Current Sanctions Imposed by Canada" (14 June 31 . SOR/ 86-876.
2019), online: Government of Canada <https://www.
32. Supra note 1 (emphasis added).
international.gc.ca/ world-monde/ international_
relations-relations_internationales/ sanctions/current- 33. Jockey Canada Company, on line: Canadian
actuelles.aspx?lang=eng>. International Trade Tribunal <https://decisions.citt-
tcce.gc.ca/ citt-tcce/ c/ en/ item/ 352004/ index.
18. RSC 1985, c F-29.
do?q=jockey+canada>.
19. "Tariff Rate Quotas: Agricultural Products;' on line:
34. 2015 FCA 58.
Global Affairs Canada <https://www.international.
gc.ca/controls-controles/ prod/ agri/tarif. 35. Daniel Schwartz, "Rana Plaza Compensation Would
aspx?lang=eng >. Cost Reta ilers Little;' CBC News (25 October 2013),
online: <http://www.cbc.ca/ news/world/ rana-plaza-
20. Ibid.
compensation -would-cost-retailers-little-1.2224749>.
21. RSC 1985, c F-27; SC 1990, c 21; SC 1990, c 22; SC
36. Globalization 101, A Project of SUNY Levin Institute,
2012, c 24; RSC 1985, c S-8.
"Manufacturing: After the Bangladesh Factory
22. RSC 1985, c C-38; RSC 1985, c F-27; RSC 1985, c H-3; Collapse" (22 July 2013), online: <http://www.
RSC 1985, c T-13; SC 2002, c 28; RSC 1985, c T-1 O; SC globalization 101.org/ manufacturing-after
1997, c 36; RSC 1985, c P-19. -the-bangladesh-factory-collapse>.
23. "Importing commercial goods into Canada: 1. 37. BBC News, "Bangladesh Building Collapse Death Toll
Preparing to import" (4 July 2018), online: over 800" (8 May 2013), on line: <http://www.bbc.
Government of Canada <https://cbsa-asfc.gc.ca/ com/ news/ world-asia-22450419>.
import/guide-eng.html>.
38. Dean Nelson, "Bangladesh Building Collapse Kills at
24. CBSA (2018), online: <https://www.cbsa-asfc.gc.ca/ Least 82 in Dhaka;' The Telegraph (24 April 2013),
trade-corn merce/ ta riff-ta rif/ 2018/ htm l/ ru les-reg les- online: <http://www.telegraph.co.uk/news/
eng .htm I>.© Canada Border Services Agency, 2019. worldnews/ asia/ bangladesh/ 10014778/ Bangladesh-
bui lding-col lapse-kills-at-least-82-i n-Dhaka.htm I>.
25. "Tariff Classification Advance Ruling: Laser Tag Game
Poncho" (24 April 2018), on line: Canada Border 39. Ibid.

40. (2018), online: <https:// bangladeshaccord.org/ 2018" (26 October 2017, online: <https://bangladesh
about> accord.org/ resources/ press-and-media/ 2017/ 10/ 26/
accord-continuation-beyond-may-2018>.
41. Accord on Fire and Building Safety in Bangladesh,
News Release, "Accord Continuation Beyond May
WEBSITES
Canadian Association of Importers and Exporters: <http:// Canada Border Services Agency: <https://cbsa-asfc.gc.ca/
www.iecanada.com> menu-eng.html>
Canadian Food Inspection Agency Automated Import Export Development Canada: <https://www.edc.ca/>
Reference System (AIRS): <http://www.inspection.ge. Trade Commissioner Service: <https://www.
ca/ plants/ imports/ airs/ eng/ 1300127512994/ 13001276 tradecommissioner.gc.ca/ trade_commissioners-
27409v> delegues_commerciaux/index.aspx?lang=eng>
Global Affairs Canada: <http://www.international.gc.ca/
international/ index.aspx?lang=eng>
LIST OF CASES
Canada (Attorney General) v Igloo Vikski Inc, 2016 SCC 38
Skechers USA Canada Inc v Canada (Border Services Agency),
2015 FCA 58

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CHAPTER 5

Canada's Response to Global

LEARNING OBJECTIVES CHAPTER OUTLINE

Domestic Legislation Governing Imports and Exports

• protection of the health and safety of Canadian residents;

© [2020) Emond Montgomery Publications. All Rights Reserved.

The Customs Act: Rules for Imports and Exports

The Customs Tariff

© [2020) Emond Montgomery Publications. All Rights Reserved.

s 16: rules of origin;

Excise Tax Act-Goods and Services Tax

Special Import Measures Act

Canadian Border Services Agency

© [2020) Emond Montgomery Publications. All Rights Reserved.

1. collecting duties and taxes on imported goods,

The Canadian International Trade Tribunal (CITTJ

© [2020) Emond Montgomery Publications. All Rights Reserved.

The Export Control List

• some agricultural products-for example, sugar and peanut butter;

The Area Control List

Different Types of Export Permits

© [2020) Emond Montgomery Publications. All Rights Reserved.

Export Controls and US Legislation

• restricted goods, including weapons and hazardous wastes;

Import Controls on Agricultural Products

© [2020) Emond Montgomery Publications. All Rights Reserved.

Canadian Regulatory Requirements Affecting Imports

BOX 5.1 Customs Brokers Assisting Businesses

© [2020) Emond Montgomery Publications. All Rights Reserved.

FIGURE 5.1 Sample Nutrition Label

Bilingual labelling List of ingredients and allergens

Common name Net quantity

Country of origin Nutrition labelling

Legibility and location Standards of identity

How to Import: Practical Considerations

© [2020) Emond Montgomery Publications. All Rights Reserved.

Identifying the Goods and Tariff Classification

15 is the chapter number;

© [2020) Emond Montgomery Publications. All Rights Reserved.

FIGURE 5.2 Excerpt from Chapt er 15 of the Customs Tariff

Tariff issl Description of Goods Unitof l MFN Applicable I

1508.10.00 00 -Crude oil KGM 4.5% CCCT, LDCT, GPT, UST,

1508.90.00 00 -Other KGM 9.5% CCCT, LDCT, UST, MT,

1509.10.00 -Virgin Free CCCT, LDCT, GPT, UST,

Source: © Canada Border Services Agency, 2019.

© [2020) Emond Montgomery Publications. All Rights Reserved.

General Rules for the Interpretation of the Harmonized System (GIRs)

To rephrase, Rule 2 means that unfinished, incomplete, unassembled, or disassembled goods

© [2020) Emond Montgomery Publications. All Rights Reserved.

For example, a 3-in-l magnetic phone holder is considered to be a composite good

The World Customs Organization's Explanatory Notes to the HS

CBSA's Advance Rulings

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CBSA Memoranda, Guides, and Custom Notices

© [2020) Emond Montgomery Publications. All Rights Reserved.

Example of Laser Tag Game Poncho.

Consequences for Misclassification of Goods

© [2020) Emond Montgomery Publications. All Rights Reserved.

Rules of Origin of Goods

BOX 5.3 Case Highlight

Igloo Vikski's Hockey Gloves

© [2020) Emond Montgomery Publications. All Rights Reserved.