Many consumers and importers have questions about the current discussion on duty and surtax being imposed on goods imported or exported.

An import duty is a tax collected on imports by a country's customs authority. It is based on the value, the classification, and origin of the goods in the tariff administered by the importing country.

Import duty has been referred to as a customs duty, a tariff, an import tax, and an import tariff. All these names apply to the same thing: Duty. However, Surtax is different.

To make the differentiation between the two, you must first understand duty as it relates to the Country of Origin and Free Trade Agreements.

How Country Of Origin Determines Duty

Rates of duty can differ depending on where the goods were made and that specific country's trade relation status with the country from where the goods are being imported. As an example, Canada has many trade agreements with other countries which would affect the tariff or duty applied to specific goods imported into Canada, such as the North American Free Trade Agreement (NAFTA).

Generally, there is a rate for a developed country and a special rate for a non-developed country.

What Is A Surtax?

Surtax is an additional duty applied to goods that are already dutiable. Surtax in Canada is imposed by an Order in Council, which sets out the amount of the surtax, the goods to which it will apply, and the duration.

The Canadian government provides a Notice of Intent and/or a Notification of the surtax. The notification will identify the rate of the surtax, the goods which the surtax will apply, and the period that the surtax will be collected. When the period of the surtax is extended beyond the period specified in the Order in Council, the Canadian Government will issue a Notice.

Canada Announces Commodities Affected By Retaliatory Surtax

Proposed Surtax Announced May 31, 2018

On May 31, 2018, the U.S. announced the imposition of surtaxes on imports of certain steel and aluminum products from Canada (at the rates of 25% and 10%, respectively).

In response, Canada issued a Notice of Intent to impose a surtax on imports of steel, aluminum, and other products from the U.S. Canada announced that the surtax will take affect July 1, 2018, and will remain in place until the U.S. eliminates its trade measures against Canada. The surtax will only apply to goods originating from the U.S.

Will NAFTA Eligible Goods Receive The Surtax?

Yes, provided they are on the list of commodities that the surtax will be applied to. This would mean NAFTA eligible goods will remain duty-free, however, they will be subject to the surtax amount.

Canada Imposes Provisional Safeguard Surtax On Seven Steel Products

Will Commodities Eligible For Duty Elimination Be Required To Pay The Surtax?

Commodities listed in Chapters 98 and 99 of the Customs Tariff will have the surtax applied upon importation into Canada.

As you can see, many products currently receiving the benefit of duty-free importation into Canada will be subject to the surtax. As the surtax has been proposed on a wide variety of commodities, it is essential to your operations that you understand how your import costs will be affected.

You should determine if they will increase, negotiate with your vendors and seek out alternative sourcing options. Plan A is ideal, but a good Plan B can help you stay ahead of surtax.

Speak With A Trade Advisor

  • *If your imported goods are on the proposed list of commodities that may be subject to surtax come July 1st
  • *Alternative options for materials sourcing (alternative countries where you may take advantage of preferential duty rates or Free Trade Agreements)
  • Freight rates from your alternative origins

*Charges may apply.

Trade Advisor
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About Author
Jan Brock

Jan Brock joined Pacific Customs Brokers in 2015 as a Senior Trade Advisor. She retired from Canada Border Services Agency (CBSA) in 2015 after serving more than 37 years. Jan started her career with CBSA as a summer student in 1976 and worked part-time until she graduated from U.B.C. with a Bachelor of Education Degree in 1980 . Shortly after graduating from U.B.C. Jan worked full time as an inspector with CBSA and within three years was promoted to Superintendent. She served some time in the Regional Operations office as an Operations Review Officer before she was promoted to Chief of Operations first at the Customs Mail Centre, then in the Metro District as the Commercial Chief and ending her career as a Chief at Pacific Highway Commercial Operations where she served as Chief from 1992 to 2015. During her career she was a member of the Customs Drug Team and a trainer in the National Enforcement Program. Jan also served as the Regional Coordinator Officer Powers and Use of Force for the Pacific Region. Jan served on many Commercial Program Reviews and committees both national and regional during her career and possesses an expansive knowledge of importing and exporting into and from Canada.

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While we strive for accuracy in all our communications, as the Importer of Record it is incumbent upon your company to ensure that you are aware of the requirements under the new regulations so that you maintain compliance as always.