Don’t Let Loose Threads Ruin Your Wedding Day
With wedding season fast approaching, Canadian event vendors are placing their orders. This year is forecasted to include the largest number of weddings worldwide, and many wedding dress shops will be looking for more inventory than ever before. With 80% of wedding dresses made in the US, many Canadian bridal shops will be importing these beautiful gowns. But did you know that a single cotton thread in the dress can impact rules of origin, and determine if a Free Trade Agreement can be used or not? This is an example of one of the many things to consider when importing textiles into Canada.
Today’s post will provide information about the laws and regulations surrounding textile imports, specifically with importing wedding dresses into Canada, including Tariff Preference Level (TPL), labeling specifications, and how the thread used can lead to increased duty.
Preparing To Import Wedding Dresses Into Canada
Documentation Requirements For Importing A Wedding Dress
When shipping a wedding dress into Canada, the types of documentation required could vary depending on the reasons for import. For example, if you are importing goods into Canada for commercial purposes, you would need to obtain a Business Number (BN) first. However, if you are shipping a wedding dress personally, you can bring your wedding gown to Canada via carry-on luggage, courier, or mail as a casual import declaration. If the gown has been in your family for generations, you can bring it into as a personal effect. Canada Customs considers personal items to be used or owned by an individual for at least one year.
In today’s scenario, we will be importing a dress into Canada for commercial use, which would require the following documentation:
- Obtaining a Business Number (BN). A business number is issued by the Canada Revenue Agency (CRA); this number is one of the first steps in beginning the importation process into Canada.
- Canada Customs or Commercial Invoice. The International Trade Administration (ITA) stated that the most important document required from a US exporter is a properly completed Canada Customs Invoice (CCI). However, the only paperwork required for most courier or ground shipments is a standard business invoice which includes the same details as a CCI. These invoices provide Customs with vital information on the quantity, costs of goods, country of origin, and the value of the shipment.
- Certificates or Permits. During the classification of goods, Importers can pair their imports with Free Trade Agreements, which could reduce duties on certain imports. If Tariff Preference Level (more on this below) is utilized the customs broker will apply for the permit on behalf of the Importer.
Classifying Wedding Dresses
The HS classification of a wedding dress made of woven materials would fall under the HS Classification Heading 62.04. The remaining 6 digits of HS tariff classification is dependent on the type of fabric that composes the majority of the dress. Suppose you are a US company looking to import wedding dresses into Canada. The CUSMA FTA allows for originating goods to be subject to reduced duty rates, which are less than Most Favored Nation (MFN) rates.
MFN is the preferred rate of duties that countries impose on imports that could alleviate the costs of importing to countries that share an FTA.
It is important to note that not all goods imported from the US into Canada can benefit from this FTA, as the wedding dresses are made of many different components and if the dress doesn’t meet the rules of origin of the free trade agreement, then it will be subject to MFN duty rates.
Wedding dresses must be classified accurately to help CBSA determine the risk they pose, or if the item is on a border lookout.
Country Of Origin
Country of origin is where a good is grown, manufactured or produced. If your wedding dress is made in the US then it may qualify for reduced duty under the CUSMA Free Trade Agreement.
For the goods to qualify, you must determine whether they satisfy the Rules of Origin of the CUSMA agreement, which according to the CBSA, defines originating in four ways:
- Wholly obtained and produced in the CUSMA region.
- Goods produced in the CUSMA region using non-originating materials provided that the goods satisfy all requirements of Annex 4-B (Product-Specific Rules of Origin).
- Produced entirely in one or more CUSMA regions from exclusively originating materials.
- Or, except for goods provided for in Chapters 61 to 63 of the Harmonized System that;
- Produced entirely in one or more of the CUSMA regions.
- There were one or more non-originating materials used as parts under the Harmonized System used in the production of the good which cannot satisfy the requirements in Annex 4-B (Product-Specific Rules of Origin) since the goods and its materials are either classified under the same subheading or the same heading.
- The regional value content of the good is not less than 60% of the transaction value method used, or it’s not less than 50% of the net cost method used.
Now, this is where things get a bit tricky. For example:
If a wedding dress was produced in the US, but the thread used to attach the beads to the clothing came from China, the dress would not meet CUSMA rules of origin. This dress would be produced in the US with non-originating materials, meaning the goods will be subject to import duties estimated at 16% -18%.
However, if the wedding dress is wholly made from US-originating materials and goods, it would qualify under CUSMA, reducing the duty rate to zero.
Tariff Preference Level Reduce Duty On Wedding Dress Imports
Some textiles can be imported into Canada under what’s referred to as the Tariff Preference Level (TPL). Some FTA allows for a certain amount of non-originating content in textiles, by way of TPL and a shipment specific permit is then applied for.
A TPL allows for reduced duty when trading specific quantities of specific yarns, fabrics, apparel, and textile articles among countries in certain Free Trade Agreements (FTA). This TPL only applies if the import or export meets the modified FTA rules of origin under the specific agreement.
According to Global Affairs Canada, “Canada’s free trade agreements (FTA) with the United States, Mexico, Chile, Costa Rica, and Honduras contain tariff preference level (TPL) provisions for certain textile and apparel goods being imported or exported within the respective free trade zones.”
TPL will allow for a specified amount of commercial imports of textiles that contain non-originating materials at a lowered rate. Once the threshold is reached, the normal rate of duty will be applicable.
For Importers to qualify for TPL, they are required to obtain an import permit issued by Global Affairs Canada. The Importer will need to prove that the goods meet the rules of origin, which will generally come in the form of a certificate from the Exporter.
If you are using the services of a customs broker, they will apply for a permit on your behalf. However, if you didn't opt for these services, you would need to apply for a permit directly from Global Affairs Canada for import clearance.
Trade of non-originating textiles and apparel commodities not covered by an FTA or countries apart from the ones listed above that do not have a Canadian permit or certification requirements and are subject to Most-Favoured Nation (MFN) duties. Without applying TPL, your textile imports rate of duty will typically range between 17%-18% in Canada.
Importing Wedding Dresses From The US
Commercially importing wedding dresses into Canada can be a daunting experience. However, it is a market with lucrative potential. On average happy couples spend around $15,000 CDN on their wedding day, which could sound like a pot of gold for any US business specializing in wedding dresses.
Labels Of Wedding Dress Import
The Competition Bureau Canada provides information about the label requirements of imports into Canada. They state that under the Textile Labelling Act, any textile fiber, yarn, or fabric and any products made in whole or in part from a textile fiber, yarn, or fabric must be labeled before being sold in Canada. Under this law, the sale, importation, and advertising of any consumer textile product marked with inaccurate and misleading information are prohibited.
All clothing items sold in Canada require the label information to contain the following:
- Fiber content (if 5% or more).
- Information to be presented in English and French.
- Dealer identification number.
Fiber content example according to a wedding dress would consist of the following information;
Under the Textile Labelling Act, the garment labels should be formatted according to the following requirements:
- Appear on disclosure label.
- Withstand ten washes without information disappearing.
- Accurate size and care instructions if added to the label. Although this information is not a requirement to be placed on the label, it should be correct.
This post is a guide to help you understand the requirements of importing commercial goods into Canada and prepare you for the requirements of doing business internationally. The importing and exporting process can be tricky to navigate, and this is to ensure that goods coming into Canada do not harm domestic markets, which is why there might be a few CBSA hurdles to jump over. Still, there are partners in the trade that will always provide help when you need it most.
And that’s how a single thread can change the landscape of your import. Watch our webinar or speak to a trade advisor today to learn more about classification.