Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Reduced Landed Cost Through Duty and Referral Tax Deferral Programs

Posted February 14, 2018


Video Transcript



One of the questions I'm always asked, are there any programs available that can help me manage or reduce my landed costs more effectively?


Quite simply, the answer is yes.

The Canada Border Services Agencies has six duty deferral programs and two tax deferral programs. I'm going to touch base on three of the most commonly used programs.

The Bonded Warehouse Program is a benefit to importers who wish to relieve the payment of custom's duties, antidumping and countervailing duties, any excise taxes or excise duties, as well as a goods and services tax up to four years from when the goods are imported. Probably the biggest deterrent to this program is that every time you want to remove products from the warehouse, you need to submit a custom's entry. This can be a little bit of an issue if you've got any rush orders, as usually it takes Canada customs about 24 hours to be able to process the release for these goods.

The Duties Relief Program has many of the same benefits as the Bonded Warehouse Program, other than the fact that you need to pay the goods and services tax. Having said that, this is not such a big deal for a lot of importers since the goods and services tax can be used as an input tax credit to offset any taxes that you may have to pay Canada Revenue Agency.

Another benefit to utilizing the Bonded Warehouse or Duties Relief Program is that many countries consider the goods to have not have entered into the commerce of Canada, meaning that in many cases, you only have to pay duty on the cost of your imported product opposed to the selling price of your customer. And probably the most commonly used program for importers in Canada is the Duty Drawback Program. What this program means is that duties are paid when the goods are imported into Canada, but can be recovered up to four years from when the goods were imported when you move the products out of the country.

Under any one of these three programs, the Canada Border Services Agencies can issue penalties. For U.S. purposes, the U.S. Duty Drawback Program is much the same as that required in Canada, other than a couple of major changes. The duty recovery is 99% of the duties paid opposed to 100% in Canada, and the timeframe for recovery is 3 years from date of import opposed to 4 years from date of import into Canada.

The Foreign Trade Zone Program, which many internationally know as the Free Trade Program, allows product to enter into the zone without any duties being paid. You can manipulate the goods in there and duties only need to be paid when they are removed from the zone, and the importer has a choice to either pay duties on the cost of the imported materials to manufacture their item or on the duty on the finished product. In many cases, the duty on the imported products are higher than the duty on the finished product, so there's some real benefits that can be used there.

In either case, it's important that you talk to your service providers to help you understand the program and ensure that they're looking after your needs.

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