The Canadian government provides many opportunities for importers to receive refunds relating to customs duties previously paid. It is good business practice for importers to be aware of these opportunities and we have found in recent experience that this awareness could be improved in our own clients and their trade partners.

Refund of duties

The Customs Act allows for a refund, or partial refund, to a person who paid duties on imported goods in many situations. Refunds under section 74 are treated as voluntary self-adjustments (filed under cover of a Form B2 – Canada Customs – Adjustment Request).

There is a general four year time period for the submission of refund claims, except for NAFTA or CIFTA goods where the time frame is one year; perishable goods in some instances require notice of a claim within 3 days.

There are several situations under which a person can claim for a refund, such as (with corresponding time limits within which to provide notice of a claim). The most important are situations where:

  • duties were paid on goods imported on or after January 1, 1994 from a NAFTA country, but no claim for preferential tariff treatment under NAFTA was made at the time the goods were accounted for (within 1 year of the date of accounting for the goods); and
  • duties were paid or overpaid due to an error in the determination of origin, tariff classification or value for duty (within 4 years after the date of accounting for the goods).

There are other refund situations including where the imported goods were damaged or inferior, where there were shortages or refunds due to clerical errors made at importation.

There are various evidentiary requirements applicable to claiming a refund under the above headings. In addition, each reason for a refund claim has its own monetary limits for the potential refund. As per below, clients are encouraged to contact McMillan's International Trade group and the authors for complete details.

Drawbacks

Under the Duty Drawback Program, the CBSA allows refunds of duties to those who import goods into Canada that are re-exported after:

  • not being used for any purpose other than being displayed or demonstrated in Canada;
  • being further processed, directly consumed or expended (goods other than fuel or plant equipment) in the manufacture or production in Canada; or
  • being used for the development or production in Canada of other goods.

For goods that qualify, as per above, an importer may file a drawback claim for the duties paid on the imported goods to recover the duties, anti-dumping or countervailing duties, or excise taxes other than GST/HST, plus interest. An importer may also claim a drawback for scrap or waste which results from the further processing of goods, however that scrap or waste cannot have merchantable value or else it must also be exported.

Form K32 – Drawback Claim must be completed and submitted with supporting documentation. The timeline to file the drawback claim is 4 years from the date the imported goods were released (or 2 years in situations where both imported and domestic goods are used in the processing of end products).

The key factor in the ability to claim a drawback is that the imported goods must subsequently either have been exported, or deemed to be exported from Canada. 

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2012 McMillan LLP