Unit III. Duty Free Tax Exemptions on Returned Goods

7 Rules for Customs Duty Savings for Items on Return to Canada

These international trade secrets can save both commercial importers and individual travelers thousands of dollars in tariff duties and taxes on goods returned to Canada.

One Canadian aunt took over $30,000 worth of jewelry (spelled jewellery in Canada) to wear during a 10-day wedding in New Delhi. Her mistake was that she did not declare her jewels nor take receipts for her original purchases when she left for India. While in India, the Canadian lady had extra diamonds added to a necklace.

On return to Canada, the Canadian lady declared the diamonds added to her necklace in India. However, the CBSA charged full tariff duties on over $30,000 worth of jewelry. This was because the declarer did not have original receipts or other proof that these were returned goods that she already owned, and that the only increase in value were the extra diamonds added to the bracelet.

There are 7 specific business rules that determine whether or not tariff duties and taxes are payable on returned goods.

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On return, goods will clear customs under a special harmonized tariff code that starts with the following 8 digits:

9813.00.00 for goods originally made, grown or finished in Canada

98.14.00.00 for goods that originated in countries other than Canada.

To qualify for customs duty savings, importers must fill in exception code 51 under tariff code field 28 on the B3 Canada Customs Coding Form. The B3 is needed for imports worth $1,600 or more.

The above special HS codes also apply to equipment was shipped out of Canada solely for testing purposes only. When re-imported, testing equipment is both duty free and a candidate for tax exemptions.

Tariff Duty Refunds

These practical tips show how importers can increase their chances of winning maximum tariff duty refunds within prescribed deadlines.

Customs authorities do issue refunds on duties paid on imported goods under specific conditions.

Importers are encouraged to visit a Canada Border Services Agency (CBSA) office to work hand-in-hand with CBSA officers.

Refund applicants should set up a file, document all discussions with the CBSA and follow up promptly on any questions that CBSA officers have.

What Reasons Justify a Tariff Duty Refund?

Under section 74 of the Customs Act, importers can apply for a refund of tariff duties under any of the following scenarios:

Imported goods are damaged, destroyed or suffer deterioration from when first shipped to Canada up to the time that a customs officer releases the items.

The quantity of released goods is less than the quantity for which tariff duties were paid.

Imported goods turn out to be of inferior quality than the declared items on which duties were paid.

No claim for free trade preferential tariff treatment was made when the goods were first accounted for to customs.

A clerical, typographical or similar error was made when duties were first calculated.

The origin, tariff classification or value for duty for the imported goods was incorrectly determined.

Imported goods are disposed of before any other use is made of the goods in Canada.

Typically, the CBSA reserves the right to assess refunds on duties that were overpaid or paid in error for any other reason that the authorities prescribe.

What are the Deadlines for Claiming a Refund?

Generally, importers must apply for a refund within four years of the date on which they first accounted for the imported goods with customs. If the imported goods should have been covered under the North American Free Trade Agreement (NAFTA) or are from Chile, the refund claim deadline becomes one year from date of first accounting.

In addition to the above claim deadlines, importers should be keenly aware that they are 100% responsible for applying for a refund. The CBSA will not automatically issue a refund payment.