Trade Talk Blog I
n 2021, Canada exported $503.4 billion of goods, 91.3% of which was exported to the United States. And in the same year, Canada imported US$488.9 billion worth of goods, 54.8% of which came from fellow North American nations. Although they share a lot in common, the United States and Canada have very different import rules and regulations. In this article, we’ll walk you through the specific import laws for each country.
Importing from the U.S. to Canada
If you’re planning to import goods from the United States into Canada, there are a few things you need to know. First, you must determine if the goods you wish to import are allowed into Canada and if they meet Canadian safety, security, and quality standards. You also need to know if there are any special permits or requirements for the goods you want to import.
If you are importing goods into Canada for commercial use, you will need a Business Number (BN). BNs are issued by the Canada Revenue Agency free of charge. You can register for a BN through the Canada Revenue Agency (CRA) website or by calling 1-800-959-5525.
Some goods are prohibited in Canada, such as material suspected of constituting hate propaganda, sedition, or treason — less obvious goods that are prohibited include used mattresses, for example. You can find more information on prohibited goods in CBSA’s Departmental Memorandum.
The role of CBSA and other government agencies
Also known as Canada Customs, CBSA is the agency that regulates all imports into Canada. It also acts as the focal point between importers and other government agencies.
Besides ensuring that imported goods follow all import rules and regulations, CBSA is responsible for administering the requirements of the legislative import of other government departments and agencies. These agencies are called Participating Government Agencies (PGAs) and include the Canadian Food Inspection Agency (CFIA), Transport Canada, Environment Canada, and Health Canada. A lot of imported goods are subject to PGAs. Departmental Memorandum Series D19 provides detailed information on the Acts and Regulations of Other Government Departments.
Taxes on Canadian imports
There are three types of sales taxes you will need to consider when importing goods from the U.S. to Canada:
Goods and Services Tax (GST)
GST is a 5% value-added tax levied by the federal government for most goods and services sold or provided in Canada, including imported goods. GST applies to most transactions in Canada, including those that occur across provincial and territorial borders. In addition to the GST, some provinces have a provincial sales tax rate. This is where it gets tricky for importers in Canada because there are different rules for each province/territory.
Provincial Sales Tax (PST)
PST is a tax levied by some provincial governments and imposed on the sale of many goods and some services within these provinces. The rate charged varies from province to province. PST is not collected on commercial imports.
Harmonized Sales Tax (HST)
HST combines the GST with PST into a single tax that the federal government collects. Newfoundland and Labrador, Prince Edward Island, New Brunswick, Nova Scotia, Ontario, and British Columbia are the only provinces that have adopted HST right now (at varying rates).
Whether your goods are subject to GST/HST depends on the type of goods or services imported. The Canada Revenue Agency (CRA) separates them into three categories:
- Taxable goods and services are goods and services that you would normally charge the GST/HST on if you were not part of a qualifying small supplier group. So, once your business has more than $30,000 in gross revenue, you must register with the CRA and charge GST/HST on your taxable goods and services.
- Zero-Rate Supplies are goods and services taxable at the rate of 0%. In this case, although your imported goods and services may be subject to GST/HST (or PST), you will not have to pay any tax on them. Examples of zero-rated supplies are basic groceries such as milk, bread, or cereal. Note that you will still need to register for GST/HST even if you only import zero-rated supplies.
- Exempted supplies are exceptions in which goods and services aren’t subject to GST or HST, and you generally cannot register for a GST/HST account if you provide only exempt supplies. That means that you do not charge the GST/HST on these supplies of property and services, and you are not entitled to claim ITCs on property and services acquired to provide these supplies. These supplies include childcare services, most financial services, used housing, health and dental care services provided by a dentist or doctor, etc.
You can use our Duty and Tax Calculator to determine how much you’ll be expected to pay at customs.
Imported goods may also be subject to Excise Taxes and Duty that apply to certain goods such as tobacco, alcohol, and fuel.
Excise Tax is applicable on:
- Automobile air conditioners
- Certain vehicles
- Certain fuels
Excise Duty, imposed under Excise Act, 2001, is applicable on:
- Certain alcohol products
Personal vs Commercial Imports
- Personal Shipments attract a higher tax rate. Importers will be required to pay the 5% Government Sales Tax (GST) plus Provincial Sales Tax (PST) which is between 5 and 13%, depending on where you live.
- Commercial Shipments attract the 5% Government Sales Tax (GST) with some exceptions. Moreover, they require that you have an importer activation number from Canada Customs and the Canada Revenue Agency (CRA).
If you wish to import a car from the U.S. to Canada, the 15-year rule exempts you from the Registrar of Imported Vehicles (RIV) program. However, you will need to provide proof that the vehicle is older than 15 years.
Canadian import requirements
The documents you’ll require to import goods into Canada are:
- Canada Customs Invoice (CCI)
- CUSMA/USMCA Certificate of Origin
- Packing List
- Bill of Lading
- Import Licenses or Certificates (if applicable)
- B3 Customs Entry Form
Canadian Customs Entry
The Customs Entry B3 Form is a tax return that must be submitted for every import. The form includes the following:
- Importer and exporter identification
- Duty and taxes
- A detailed description of the imported goods
Once your goods arrive at Canadian borders, they will be reviewed by the Canada Border Services Agency (CBSA). CBSA will then determine whether your shipment will be immediately released or inspected. You will be required to submit all import documents at this stage and pay any tax or duty on your imported goods.
Importing from Canada to the U.S.
To import goods from Canada to the U.S., you will need an Importer Number, also known as a Business Tax Number or Customs-Assigned Number, which you can get through the Internal Revenue Service (IRS) if your imported goods are valued at USD 2,500 or more. This number will be required on all your import paperwork.
However, you will not need an import license in general. Only some imported items may require special permits from other government agencies (plants, animals, dairy products, medications, etc.)
Prohibited and restricted goods
The U.S. Customs and Border Protection (CBP) prohibits importing goods that would injure community health, public safety, American workers, children, domestic plant and animal life, or those that would defeat American national interests — all of these items are listed on CBP’s website.
The role of CBP
CBP is the governmental agency any person or entity must deal with when importing goods into the United States. CBP requires that importers maintain knowledge of all relevant laws, regulations, and procedures relating to importing goods into the United States. Importing into the United States is governed by an extensive body of law that includes treaties and agreements with other countries, U.S. statutes, executive orders by various presidents, administrative rulings, and court decisions.
The role of other government agencies
CBP is also responsible for enforcing hundreds of laws for 40 other government agencies, such as the Department of Agriculture (USDA), the Department of Transportation (DOT, and the Environmental Protection Agency (EPA). These agencies have their own rules about what can be imported into the country. If any of these other government agencies regulate your imported goods, then there may be additional requirements that must be met before importing your goods.
Taxes on U.S. imports
Taxes on U.S. imports are not fixed and depend on the value of your shipment and where it was imported from. Duty tax rates are usually between 0 to 37.5%, and a flat rate of 3% applies to e-commerce purchases above the U.S. import tax threshold of $800.
U.S. Customs Entry
A Customs Entry is a declaration that includes specific information about the merchandise you’re importing into the U.S. There are two parts to filing a Customs Entry: the Entry and the Entry Summary. Both of these presentations are required by the Federal government.
The Entry can either be declared as:
- Section 321 Entry: shipments valued at less than 800 dollars (provided there are no other government agency requirements).
- Informal Entry: shipments valued between $800 and $2,500.
- Formal Entry: shipments valued at more than $2,500.
Formal entries will require that you purchase a customs bond, which we cover in the next section.
An Entry Summary must also be filed, and the estimated duty must be paid no later than 10 days after the shipment has arrived. Also known as CBP Form 7501, the Entry Summary refers to the documents required to assess duty, collect information, and determine if additional requirements have been met on your imported goods. The Entry Summary presentation includes things like:
- Customs Value of the merchandise
- How much duty is owed
- Information regarding special rates of duty such as Free Trade Agreements, Section 301, Section 232, Antidumping, and/or Countervailing duty
- How much taxes or fees are owed
- How will duty be paid
- When duty will be paid
- Special licenses, permits or certificates
If your imported goods are intended for commercial use and are valued at over $2,500, you will need to obtain a customs bond. Also known as an import bond, a customs bond can be purchased from a CBP-licensed insurance or surety company. This bond ensures that all duty owed to CBP will be paid. There are two different types of customs bonds, and each one of them covers a specific purpose:
- A single-entry bond is used for shipments valued at less than USD 50,000. You will only be able to use this type of bond once.
- A continuous bond covers multiple entries into the U.S. but expires yearly, unless renewed.
If you wish to import a car from Canada to the U.S., you can make use of the 25-year-rule which specifies that motor vehicles that are at least 25 years old can be imported into the United States without having to worry about compliance with Federal Motor Vehicle Safety Standards (FMVSS) set by the Department of Transportation (DOT). Moreover, if the vehicle is at least 21 years old, there are no compliance requirements by the U.S. Environmental Protection Agency (EPA).
U.S. Import Requirements
The documents you’ll require to import goods into the U.S. are:
- An Importer ID Number
- Bill of Lading (BOL
- A Commercial Invoice
- An Electronic Export Information (EEI) form (if required)
- An Import/Export License (if required)
- The USMCA Certificate of Origin (if applicable)
Preferential Treatment under USMCA/CUSMA/T-MEC
As a Canadian or U.S. importer, you may claim preferential tariff treatment under CUSMA-USMCA-T-MEC, and to do so, you will need to provide a Certificate of Origin. The Certification of Origin must contain the following nine data elements that indicate that the good is originating and that it meets other applicable requirements:
- Importer, Exporter, or Producer – Certification of Origin: Specify whether the certifier is the importer, exporter, or producer as indicated in Article 5.2 of Chapter 5 of the CUSMA/USMCA/T-MEC.
- Certifier: Provide details about the certifier, including name, title, address, country, telephone number, and e-mail address.
- Exporter: If the exporter differs from the certifier, provide details about the exporter, including name, title, address, country, telephone number, and e-mail address. The exporter address indicates the place of export in one of the CUSMA/USMCA/T-MEC countries. Exporter information is not required if the producer is completing the Certificate of Origin and does not know the identity of the exporter.
- Producer: If the producer differs from the certifier or exporter, provide details about the producer, including name, title, address, country, telephone number, and e-mail address. If you want this information to remain confidential, you may comment “available upon request by the importing authorities “. When there are multiple producers, state Various or provide a list of producers.
- Importer: Provide – if known – the importer’s details, including name, address, e-mail address, and telephone number. The importer’s address must be in a CUSMA/USMCA/T-MEC country.
- Description and Harmonized System (HS) Tariff Classification of the Good: Describe the good in sufficient detail to relate it to the good covered by the certification. If the Certification of Origin covers a single shipment, provide the invoice number of the exportation (if known). Also, provide the HS Tariff Classification (to the 6-digit level) located in the Customs Tariff.
- Origin Criteria: Specify the origin criterion under which the good qualifies, as stated in Article 4.2 (Originating Goods) of Chapter 4 of the CUSMA/USMCA/T-MEC.
- Blanket Period: If the certification covers multiple shipments of identical goods for up to 12 months, include the period – as stated in Article 5.2 (Claims for Preferential Tariff Treatment) of Chapter 5 of the CUSMA/USMCA/T-MEC.
- Authorized Signature and Date: The certification must be signed and dated by the certifier and accompanied by the following statement:
“I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request, or to make available during a verification visit, documentation necessary to support this certification.”
How GHY Can Help
At GHY, we help hundreds of businesses import goods into Canada and the United States every day. To start your importation process, book a meeting with one of our Trade Experts today — and we’ll take it from there.