Importers have an obligation to correctly classify their goods for tariff classification, and to understand the potential ramifications of incorrect tariff classification.
The benefits of knowing the nature of your goods will result in more accurate tariff classifications and duty rates, which will reduce your chances of border delays, and penalties during an audit. Your business will run smoother and more efficiently when you fully understand the nature of the goods you’re importing.
How complicated is it?
It’s not surprising that mistakes can happen when classifying goods – this stuff is complex. Here’s just one example:
- Vegetables, fruits, nuts and other edible parts of plants that are prepared or preserved in vinegar with an acetic acid concentration of 0.5% or greater are most often classified in heading 20.01 of the HS and, as such, are often duty-free under a most-favoured nation agreement.
- The same foods preserved in vinegar with an acetic acid concentration of less than 0.5% would more likely be classified in heading 20.08 which would make them subject to a 6% duty rate.
For greater certainty, seek out a tariff classification advance ruling from the Canada Border Services Agency on a products you import.
What’s the worst that can happen?
An incorrect tariff classification can result in you paying additional duties, taxes and penalties after importing. And since you will have likely sold the product to your customers by the time an audit takes place (audits can happen up to four years after import), any additional fees paid will eat into your profit margin. Monetary penalties for incorrect tariff classification can be very high, and it’s almost impossible to recover those costs after the fact.
What can I do?
Risks can be minimized by teaming up with someone who can provide the technical expertise required to properly classify your products at the time of import.
- Consider enrolling in a tariff classification course or request information and/or training from your customs broker that can improve your understanding of customs compliance and solidify your standing as an importer of record.
- Research duty rates prior to ordering and importing a new product in order to know and understand the import costs involved.
- If your company does not have a tariff specialist, consider partnering with a customs broker. These specialists will review the available supporting documentation in order to ensure a good understanding of a product’s characteristics and function for the purpose of tariff classification.
Our customs specialists are available to help with classification and to answer questions about any other customs requirements.
Information provided by: Canadian Customs Consulting Dept. - Cole International