Goods are kept in privately owned ‘sufferance’ warehouses rather than on Customs premises
Our service team has compiled the below list of most frequent misconceptions regarding Canada Customs that we typically hear. Given the breadth of the supply chain in Canada, that the CBSA’s practices remain shrouded in confusion is not surprising.
1. Customs ‘has’ your goods
Customs, only in rare cases, will take physical control of any imports. The CBSA has limited warehouse space for the massive amounts of imports the country receives daily, and instead retains control of these imports by licensing sufferance warehouses to store the imports until the CBSA approves them for release. These warehouses are strictly controlled and are not allowed to remove imports from their centres until the CBSA’s assent is given. While it remains technically true that Customs is controlling your goods, they do not have them in their possession 99% of the time. The other 1% would be when goods are delivered to Customs locations for examinations.
2. Customs is examining your shipment because they think you are importing contraband
Drug enforcement is a relatively small part of the CBSA’s mandate. Much more common in the world of commercial importing is undervaluation or fraud. If the CBSA has pulled your shipment for inspection, it is more likely due to suspicions about lost revenue (i.e. the price declared for your goods is lower than what was paid, hurting tax collection and the domestic economy). Other non-drug related inspection reasons include contaminated products, those containing soil, or illegally marked goods. Scientists believe that many invasive species were imported into Canada, a major reason for the CBSA’s skeptical exam policies.
While most exams delay the delivery of an order by one or two days, the efficiency with which the CBSA performs the task is impressive. As annoying as it is to have your shipment inspected, please pause and consider the potential environmental or economic damage the Agency may have prevented. In most cases, the importer has no idea that their shipment has been undervalued by the shipper or infested at origin until a CBSA inspection.
3. Goods made in the USA are exempt from tax because of NAFTA when brought into Canada
This is a popular myth. Unfortunately for importers (but fortunately for Canadian retailers) the NAFTA agreement only eliminates duty on items manufactured in the USA and does not affect the collection of GST. Duty and GST are distinct taxes and NAFTA only renders goods duty-free. In many cases, while the goods passed through some American labour, they do not even meet the strict requirements of NAFTA to qualify as duty-free. So for all its notoriety, the NAFTA has done nothing for you in this case.
Why does NAFTA not affect GST? It would be a huge advantage to American retailers to do so since Canadian sellers must still collect tax on all sales. The NAFTA is less and less important in today’s world because duty rates have been disappearing since the early 1990s. At the time of its negotiation, duty rates were hurting job growth in Canada, inspiring Brian Mulroney to lock the country into a three-way trade deal.
4. I need a NAFTA filled out to ship my product
This is not true although many transporters will ask for one to be completed before they ship your order. The NAFTA may save you money on duty but is never required. So long as you do not care about paying duty, you are free to arrange shipment of your goods. See answer number 3.
5. I can use my Canadian broker to import goods into the USA
This one catches a lot of companies off guard. Customs brokers can only be licensed in one country and cannot clear goods into any other country but their own. Many Canadian brokers circumvent this problem by setting up subsidiaries in the USA. So while your Canadian broker can clear your goods into the USA using their subsidiary, you will want to check first if they have set you up with the correct registration in order to import into the USA. Many importers find this out too late after promising a quick delivery to a client in the USA, only to have their shipment held up until the registration is sorted out.