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As businesses look for ways to economize, fortify their supply chains and reduce their greenhouse gas emissions, many are bringing manufacturing home. This move helps to create jobs, improve the local economy, shorten the supply chain and improve a business' green credentials. What happens when particular products or parts of products must still be imported?
The Canada Border Services Agency sets import tariffs for specific products, and how those products are classified determines the level of the tariff. For some businesses, these tariffs can be crippling, particularly when the decision to bring the majority of manufacturing to home shores was intended as a cost-saving exercise.
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How products are classified
Canada, as a member of the World Customs Organization, uses the globally recognized Harmonized System (HS) to classify goods based on how they are presented at the border.
Businesses can access an online tool that allows them to use keywords, descriptors and product codes to determine which HS code is most appropriate for their product. It is important that businesses consider each individual component that is being imported rather than the final product when fully assembled. If the Canada Border Services Agency decides that a product or component is wrongly categorized, they can charge the duty that they believe to be appropriate. It must be paid in full, plus interest, before an appeal can be launched.
This is one area in which companies can quickly see fees and legal bills escalate to unsustainable levels if they are not proactive and realistic in their classification process.
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Where to seek advice
Franchises, particularly those with centralized supply contracts that mandate particular import routes and product classifications, should verify their import tariff classifications with an appropriate business expert, such as a customs broker, to ensure that their franchisees will not be unduly penalized for their supply chain decisions. An inability to fund the cost of importing products will affect a business' profitability and could have lasting repercussions for the brand as a whole.
Businesses may also approach the Canada Revenue Agency with any questions related to taxes on imported goods. Many attorneys and accountants are well versed in tax and import tariff fees and can advise based on a business's individual circumstances.
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Record-keeping is crucial
It is essential that businesses keep thorough records of all of their import tariff determinations, justifications and payments, along with copies of any correspondence that they have with business professionals and the Canada Border Services Agency. That way, if any disagreements arise, they can be allayed quickly and cost effectively.
