CBSA Issues Notice on China Surtax Order (2024)
Trade Update • October 3, 2024
he Canada Border Services Agency (CBSA) has issued a Customs Notice to outline the introduction and application of the China Surtax Order (2024), which takes effect on October 1, 2024, and imposes surtaxes on Chinese-made electric vehicles (EVs). These surtaxes have been introduced by Canada to protect its workers and electric vehicle supply chains from unfair trade practices. The Canada Border Services Agency (CBSA) will be responsible for administering the surtax order.
Application
Effective October 1, 2024, Chinese-made electric and hybrid vehicles—including passenger automobiles, trucks, buses, and delivery vans—will be subject to a surtax of 100% of the value for duty under the China Surtax Order (2024). This surtax is in addition to the 6.1% Most-Favoured Nation (MFN) import tariff currently applied to EVs from China. For a complete list of goods impacted by the surtax, refer to Schedule 1 of the China Surtax Order (2024).
Application to Goods Originating in China
The surtax will apply only to goods originating from China, meaning those eligible to be marked as goods of China as per the Determination of Country of Origin for the Purposes of Marking Goods (Non-CUSMA Countries) Regulations. This includes both commercial and personal importations, even if the goods are shipped from a country other than China.
Application on Warehoused Goods
The surtax also extends to goods released from a Customs Bonded Warehouse or Sufferance Warehouse on or after October 1, 2024, irrespective of the original importation date.
Exemptions for Temporary Imports
The surtax will apply to vehicles classified under Chapter 99 of the Customs Tariff, with the exception of electric vehicles temporarily imported for repairs in Canada or those re-imported after repair. Such vehicles may still be eligible for the Most-Favoured-Nation (MFN) zero customs duty rate.
Exceptions for Chapter 98 Goods
Goods classified under Chapter 98 of the Customs Tariff are exempt from the surtax, with the exception of certain prohibited importation tariff items (9897.00.00, 9898.00.00, and 9899.00.00).
Duties Relief and Drawback Programs
Canadian importers may be eligible for relief through Canada’s Duties Relief and Duty Drawback Programs for surtaxes paid, provided they comply with the Canada-United States-Mexico Agreement (CUSMA).
Proof of Origin Requirements
Under subsection 35.1(1) of the Customs Act and the Proof of Origin of Imported Goods Regulations, proof of origin must be provided for all imported goods.
Commercial Goods
For commercial goods, proof of origin may take the form of a commercial invoice, a Canada Customs Invoice, or any other document that specifies the country of origin.
Personal Importations (Casual Goods)
For personal importations, also known as casual goods (goods imported for personal use rather than for commercial purposes), they are considered to originate from China if they are marked as such or if there is no origin marking and no evidence that the goods are from a different country.
Goods Marked as Originating in China
If casual goods are imported from a country other than China but are marked as made in, produced in, or originating from China, they are deemed to originate from China.
Surtax Calculation
The amount of surtax payable is calculated in the amount of 100% of the value for duty of the imported good in accordance with the China Surtax Order (2024).
Example 1:
The value for duty (VFD) of an imported good subject to a surtax is $150. The imported good has a Most Favoured Nation (MFN) duty rate of zero per cent. The applicable surtax is 100 per cent, as per the Schedule to the China Surtax Order (2024).
The amount of surtax is calculated as follows: $150 (VFD) x 1.00 (per cent surtax) = $150 (surtax payable).
Example 2:
The same imported good is subject to an MFN duty rate of 6.1 per cent. The amount of customs duties is calculated as follows: $150 (VFD) x 0.061 (rate of Customs duty) = $9.15 (Customs duties payable).
The amount of surtax is calculated as follows: $150 (VFD) x 1.00 (per cent surtax) = $150 (surtax payable).
Exceptions to Surtax
The surtaxes will not apply to Chinese goods that are in transit to Canada on the day on which these surtaxes come into force. For the purpose of this Customs Notice, ‘in transit to Canada’ refers to goods bound for Canada under the control of a carrier. Importers must have proof in their possession that such goods were in transit to Canada. Such proof may include, but is not limited to, the following documentation: shipping documents (for example, a bill of lading), report of entry documents, and cargo control documents. Such proof may be requested at any time by a CBSA officer.
In the following scenarios, the importation would not be subject to the surtax:
- The temporary importation of foreign conveyances – for example, a U.S.-registered truck moving cargo, a U.S.–registered bus transporting passengers, or a U.S.–registered electric vehicle made in China driven into Canada by a U.S. tourist (Chapter 98 of the Schedule to Canada’s Customs Tariff waives all duties and taxes on such importations).
- Returning Canadian-registered conveyances and other goods that are made in China and duty-paid – for example, a Canadian tourist is returning from the U.S. in an EV, or a Canadian-registered cargo truck or bus (such goods would have previously been released and accounted for under the Customs Act before its sale to the Canadian owner).
- Goods including EVs that are made in China and are repaired or altered across the border – for example, a U.S.–registered EV repaired in Canada, or Canadian-registered EV repaired in the U.S – including an emergency or non-emergency repair for both scenarios.
For more information on accounting, corrections/refunds, examinations, advanced rulings please view the full Customs Notice 24-32 here.
Questions about the upcoming new surtax and tariffs? Contact us, we’re here to help.
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