Canada has a number of Trade Incentive Programs to allow Canadian companies to remain competitive in the ever increasing global competitive market and to entice foreign investors to invest in Canada. Trade incentives permit companies to waive, postpone or refund some or all of the duties and taxes that would otherwise be payable. Before reviewing the many programs, let's take a look at Canada’s Foreign Trade Zone Program.
Foreign Trade Zones
What is a Foreign Trade Zone (FTZ)? A FTZ generally refers to a specific location within a country which has been designated as tariff and tax exempt.
Generally, Foreign Trade Zones are areas where certain types of merchandise can be imported into a FTZ without paying import duties. Customs duties are only payable at the time the goods leave the FTZ and enter the domestic market.
A FTZ is a location for the purchase or importation of raw materials, components, or finished goods. These items are usually stored, processed or assembled in the FTZ for export later hence no duties and/or taxes are payable unless the goods are distributed into the domestic market, then they are payable at that time.
Canada’s unique FTZ program allows FTZs to be located anywhere in Canada. This is very different from most countries like the US where FTZs have a specific geographical location.
Canada’s FTZ program does not place any restrictions on the location. Any company could be approved for the FTZ program and they could access the program anywhere in Canada.
Foreign Trade Zone Points
To help market and educate foreign and domestic entities on Canada’s FTZ Program, Canada has specialized Foreign Trade Zone Points which are designated geographical areas where public and private organizations have set up a FTZ Taskforce that is coordinated by the regional development agency. These Foreign Trade Zone Points ease access to government policies and programs, and thereby promote local and international trade.
A FTZ Point is made up of teams of public and private sector experts who can assist companies to access information, programs and incentives that can save money. These experts assist with access to federal, provincial and regional programs that support Canada’s Trade Incentive Program.
A FTZ Point promotes local trade and foreign direct investment, and is a single-point of access to information on relevant government policies and programs. Canada has 16 FTZ points currently:
- Edmonton's Port Alberta
- Quebec City
- Cape Breton Regional Municipality
- Halifax Gateway
- Winnipeg's Centreport Canada
- Calgary Region Inland Port
- Regina’s Global Transportation Hub
- Prince George
- Sault Ste Marie
- Vancouver Island
- Saint John
Canada's Duty Relief, Deferral and Drawback Programs
If you are not interested in a FTZ or access to a FTZ Point, Canada has a number of duty relief, deferral or drawback programs.
Canada’s duty and tax relief can be enjoyed anywhere in the country. Businesses can choose a program and location that best fits their needs through a number of programs which offer duty and tax relief:
- The Duties Relief Program: This program is administered by CBSA. No duty is payable on imports stored, processed or used to manufacture other products as long as the goods are exported within 4 years of being imported. This program is often used in conjunction with the the Exporters of Processing Program
- Drawback Program: This program is administered by CBSA. Imports that have had duty and tax paid on them and then they are subsequently exported may be subject to a drawback or refund of the duty paid. The goods exported must be in the same condition as when they were imported or used in the manufacture of goods exported. Application for drawback must be made within 4 years of the goods being imported.
- The Customs Bonded Warehouse Program: This program is administered by CBSA. With the permission of CBSA, companies can operate a storage facility to store, handle or move their imports. Duty and taxes are not payable until the goods enter the Canadian marketplace. Goods can be handled in the warehouse for a number of reasons such as marking, labelling, packaging, re-packaging as long as the goods are not substantially altered. Goods can also be imported in bulk and removed as needed with duty and tax payable. Goods can remain in the warehouse for up to 4 years.
- The Export Distribution Centre Program: This program is administered by the Canada Revenue Agency (CRA). This program benefits export businesses who import goods or acquire Canadian goods and then add a limited value to them prior to exporting the goods.
- The Exporters of Processing Services Program: This program is administered by the CRA. Approved applicants do not need to pay GST or HST on imports belonging to non-residents. These goods are imported for processing, distribution or storage but then are exported.
- Temporary Importation: This program is administered by CBSA. Some imports can enter Canada for a specific period of time without paying duties and taxes. This program applies to specific goods where, for example, the reason for their temporary import is for repair or training purposes. Goods are generally documented on a CBSA form E29B and CBSA may require a security deposit.
- A.T.A. Carnet: Canada is part of the International Customs Convention on the A.T.A. Carnet for the Temporary Admission of Goods. This program is an alternative to the above noted E29B. A security deposit is not required with an A.T.A. Carnet. They are not issued by Customs Agencies but rather the National Chambers of Commerce in the country of export.
- Canadian Goods Abroad Program: This program is administered by CBSA. When Canadian goods are exported abroad for repair, alteration, additions or processing, and are then returned to Canada, this program allows the relief of duties on the “Canadian” portion of the value of the goods. Duty is payable only on the value added portion.
Further clarification on Canada’s Trade Incentives and duty relief and deferral programs can be provided by one of our Trade Advisors.