China Surtax Order on Steel and Aluminum Goes into Effect

The China Surtax Order, first introduced on October 1 on electric vehicles, aims to address unfair competition from Chinese imports.

As of October 22, 2024, Canada has implemented its newly introduced China Surtax Order on steel and aluminum imports from China.

This 25% surtax will be imposed on the value for duty (VFD) and administered by the Canada Border Services Agency (CBSA). It will be levied in addition to any existing duties, including Most-Favoured-Nation (MFN) tariffs and anti-dumping duties, where applicable.

Earlier this month, Canada had introduced a 100% surtax on electric vehicles (EVs) manufactured in China, which affected imported electric and hybrid cars, trucks, buses, and delivery vans.

The steel and aluminum surtax applies to both commercial and personal imports, regardless of whether the goods are shipped directly from China or another country.

Goods released from a Customs Bonded Warehouse or Sufferance Warehouse on or after October 22 will also be subject to the surtax, regardless of their original date of importation.

Proof of origin requirements

To apply the surtax, Canadian importers must provide proof of origin for all Chinese steel and aluminum goods. Documentation, such as a commercial invoice or Canada Customs Invoice, must clearly indicate the country of origin.

Casual goods (non-commercial imports) will be considered of Chinese origin if marked as such or lack clear documentation of a different origin.

How the surtax is calculated

The surtax will be calculated based on the 25% of the value for duty (VFD).

 If the same product is subject to an anti-dumping duty, it will be calculated separately and added to the total amount owed.

Example 1:

• VFD: $150
• Surtax: $150 × 0.25 = $37.50

Example 2 (with anti-dumping duties):

• VFD: $150
• Surtax: $150 × 0.25 = $37.50
• Anti-dumping duty: $34 (calculated separately)

Exemptions to the steel and aluminum surtax

The following exemptions are in place to ensure that certain goods are not unduly affected by the new China Surtax Order:

• Steel and aluminum in transit to Canada before the surtax comes into effect on October 22 will not be subject to the additional levy. In this case, importers must provide proof of transit, such as a bill of lading or entry documents.
  
  
• Returning Canadian-owned goods that were previously imported and duty-paid, such as steel or aluminum items brought back to Canada after a trip to the U.S., will not be subject to the surtax.
  
  
• Goods temporarily imported for repair or alteration will also be exempt.

Compliance and accounting

Now that the CBSA Assessment and Revenue Management (CARM) system is live, it will be used to manage the accounting of surtaxes.

However, CARM does not automatically calculate surtax amounts owing. Canadian importers will be responsible for calculating and self-declaring the surtax during the customs declaration process.

The surtax codes for steel and aluminum are 24187B and 24187C, respectively.

Importers must manually enter the surtax amounts in the Commercial Accounting Declaration (CAD). For information on how to complete the CAD, please refer to Memorandum D17-1-10 (Coding of Customs Accounting Documents).

Corrections, refunds, and adjustments

In the case of overpayments, miscalculations, or necessary re-determinations for surtax obligations, importers must follow the procedures set forth by the CBSA.

These actions are primarily guided by the Customs Act and various memorandums, which outline the processes for adjusting declarations and applying for refunds.

Corrections and adjustments

If an error is identified, importers can correct or adjust their original declarations (including origin, tariff classification, and value for duty). This process must be done using the prescribed forms and procedures in accordance with the Customs Act and related memorandums.

 The primary reference documents are:

• Memorandum D11-6-6: “Reason to Believe” and Self-Adjustments to Declarations of Origin, Tariff Classification, and Value for Duty.

• Memorandum D6-2-3: Refund of Duties.
  
  
• Memorandum D6-2-6: Refund of Duties and Taxes on Non-commercial Importations. 

This applies to all goods, including those released under the Courier Low-Value Shipment (CLVS) program.

Requesting refunds

If a surtax overpayment is identified, importers can request a refund by submitting an adjustment to the Commercial Accounting Declaration (CAD). This can be done via the CARM Client Portal (CCP) or using EDI/API submissions.

If self-adjusting for a surtax refund or surtax payable, importers must refer to Memorandum D17-2-1, which outlines the process for adjusting CADs.

CLVS Program adjustments

For goods released and accounted for under the CLVS program, adjustments due to overpayments must follow the process described in Memorandum D17-2-1.

Non-commercial adjustments cannot be processed via CARM and must be submitted using Form B2G (CBSA Informal Adjustment Request) or through CREDITS for approved participants.

Additional guidance for non-commercial refunds can be found in Memorandum D6-2-6.

CBSA re-determinations

The CBSA retains the authority to re-determine or further re-determine the origin, tariff classification, and/or value for duty on its own initiative or in response to a self-adjustment in accordance with the Customs Act and the Determination, Re-determination and Further Re-determination of Origin, Tariff Classification and Value for Duty Regulations.

As with customs duties and taxes, the CBSA may assess any undeclared surtax.

Examinations and verifications

All importations are subject to examination to ensure compliance with various provisions, including Tariff Classification, Valuation, Origin, and any other applicable requirements under the CBSA’s administration.

If non-compliance is identified, the CBSA may assess surtaxes, customs duties, and taxes as necessary. In addition, penalties and interest may also be imposed where applicable.

Advance rulings for commercial importations

For importers seeking greater predictability in their business operations, the CBSA can provide Origin National Customs Rulings before the importation of goods.

For more details, please refer to Memorandum D11-11-1 (National Customs Rulings) and Memorandum D11-11-3 (Advance Rulings for Tariff Classification).

For more information on how this surtax might impact your steel and aluminum imports, please reach out to one of our trade professionals.