The accurate classification of shipments will help prevent unexpected charges or delays at the border.
The Canada Border Services Agency (CBSA) has issued Customs Notice 25-01 to provide detailed guidance on shipment classification for non-resident importers (NRIs).
The notice outlines the criteria for classifying shipments, which is critical for ensuring compliance with Canadian customs regulations.
Shipment classification refers to the process of categorizing goods as either commercial or casual based on the nature of the importer and the intended use of the shipment.
Commercial goods are defined as items imported for resale or use in business, industrial, or institutional operations.
In contrast, casual goods are those not classified as commercial goods.
This distinction is essential for proper customs processing, as each classification is subject to different documentation, duties, and taxes.
Misclassifying shipments can lead to delays at the border, increased scrutiny, penalties, and disruptions to the supply chain.
According to the updated shipment classification, goods purchased by an individual in Canada from a foreign vendor for personal use and delivered directly to them by courier are classified as casual.
However, the situation changes when goods are imported by the owner of the goods, such as an eCommerce vendor or a foreign sales company. In this case, the goods are classified as commercial, even if they are intended for personal use by the end recipient.
Another critical update involves the use of Business Numbers (BNs). If an NRI uses a Business Number to import goods intended for personal use by Canadian customers, the shipments are automatically classified as commercial.
These goods are subject to the same provisions and requirements as all other commercial imports, such as ensuring compliance with Other Government Department (OGD) requirements and maintaining books and records set out in Section 40 of the Customs Act.
The update also specifies that NRIs outside North America seeking to enrol in the CBSA’s importer program must designate a licensed customs broker, accountant, or other authorized agent to maintain their books and records within Canada.
Additionally, under Section 9 of the Customs Act, the importer or owner of the goods can authorize a licensed customs broker to account for the goods and pay applicable duties and taxes on their behalf. This applies to both commercial and casual shipments, with the exception of casual goods processed through the Courier Low Value Shipment (CLVS) Program.
Casual goods processed outside the CLVS Program, such as those accounted for through an Integrated Import Declaration (IID), must use an authorized broker’s BN15 for customs accounting. The use of a Courier BN in such cases is prohibited. This policy aligns with the CBSA’s position that non-commercial importers are neither required to obtain nor eligible for an importer BN15.
Moreover, as per the customs notice, the CBSA’s role in assessing and collecting taxes is limited to PST/HST on casual goods. However, when NRIs collect PST/HST at the point of sale from Canadian consumers, they are required to remit these taxes directly to the respective provinces or to the Canada Revenue Agency (CRA).
When NRIs collect taxes at the point of sale, the shipments remain classified as commercial. Consequently, PST/HST should not be included or remitted on the Customs Accounting Document (CAD).
To align with these new rules, NRIs should take the following steps:
If you are a non-resident importer in Canada, please reach out to one of our trade professionals to discuss the new classification rules and ensure your compliance.