Importing Info-Guide

Note: depending on the stage of your business, you may also want to consult the Business Start-up (Alberta) Info-Guide

CONTENTS
Importing Introduction
Information Services
International Trade
Regulations

IMPORTING INTRODUCTION

Big profits, glamour, exotic locales -- these are just some of the images often associated with importing. However, the pictures you don't see are the hard work, financial risk and frustration that go hand in hand with any import venture.

There are many questions you need to answer before you import. The three most important are:

1. Is there a market for my product? If there is no domestic market for the product, whether it is being sold directly to the consumer or used within a production process, the venture will not succeed.
2. Can I get the product that I need when I need it in the quantities I require? Timely delivery of the product is as important to the success of importing as meeting the financial demands of the venture.  It is therefore imperative that you have a solid plan to deal with these areas and closely monitor them throughout the import process.
3. Can I meet the financial demands of this venture? Importing is costly and requires careful planning in order to properly estimate and maintain your profit margin.

Why Import?
People usually begin importing for one of the following reasons:

• they see an existing product which is cheaper in another market
• they discover a unique product that is not available in Canada
• they have a business acquaintance or family member in another country involved in exporting goods from that country
• they require raw materials which are not available in Canada for manufacturing purposes

Are You Willing To Take a Risk?
There are many risks involved with importing, such as:

1. Foreign exchange fluctuations: this impacts on profit unless you protect yourself by hedging currency at a bank, or ensuring the sales agreement stipulates payment in your home currency. Any fluctuations would then be the responsibility of the supplier.
2. Tariff changes: changes in the classification of goods or the application of a new duty rate can occur without warning.
3. Change in expected prices: fluctuating export taxes and/or modified regulations in the source country can cause price changes.
4. Delivery time fluctuations: communication and transportation difficulties as well as inaccurate or incomplete documentation can cause delays in delivery time.
5. Obsolete merchandise: occurs due to a passing trend or fad.
6. Intangible risks: these include civil unrest, natural disasters, and strikes.

With any business venture there is an element of risk, and importing is no exception. Most problems stem from spur-of-the-moment decisions and improper research. To minimize your risk and avoid unnecessary losses, do your homework and develop a solid, well researched business plan.

If you are thinking of importing, it is recommended that you organize yourself into a business entity. Information on how to start a business is available at The Business Link.

The following checklist provides an overview of the areas you need to consider when planning your business:

• what are your goals and objectives?
• who are you selling to?
• what will be the form of ownership? (sole proprietorship, partnership, or corporation)
• what will be the size and scope of the business?
• what goods and services will you be offering?
• who is your competition?
• what regulations apply?
• how will you look after the bookkeeping? Will you do it on your own or hire an accountant?
• what is your financing strategy? Do you require a loan?
• what is your marketing strategy?
• have you prepared a business plan?
• what business name will you choose?
• what are the duties, taxes, insurance and warehousing costs associated with your venture?
• what is your pricing strategy?
• what are your discounting policies?
• how are you going to advertise?
• what are the local regulations?
• how will you look after maintenance requirements? What about warranties, guarantees and after sales service?
• what type of packaging and labeling will you need?
• how will you distribute the product?

Research, Research, Research
A high value is placed on research as it sets the stage for success. Proper research involves time, money, and a strong commitment to finding the answers. From the marketplace and consumer behavior to import procedures and shipping terms, your first goal is to become well versed in these topics.

Where do you start? Most potential importers already have a product in mind -- they've either discovered it when visiting another country or found where to obtain it at a lower price. Keep in mind that if you deal with goods in an area you are familiar with, you will increase your chances for success as you already know the market and understand how new products or other developments may affect the industry. However, if you are not familiar with the sector you're dealing in, educate yourself by studying industry publications.

Researching Customs Tariffs

Customs tariffs are essentially taxes that are applied to goods that enter into Canada . The amount of tariff applied is determined by the tariff classification of the goods being imported and its tariff treatment. Certain goods for example have higher tariffs than others so it is important to know as much detail as possible about the product(s) being imported. The MFN tariff rate for umbrellas for example is 7%, for umbrellas with telescopic shafts however it is 7.5 %. The same rule applies to where goods originate from. An umbrella from Austria for example may be charged a tariff rate of 7%, from China 5% and from Angola it could be free.

Classifying Your Goods

Canada uses the international Harmonized Commodity Description and Coding System (HS) as the basis for its Customs Tariff for the classification of imported goods. This code is used to determine applicable customs duty rates and allows for the collection of statistical data. It also streamlines the documentation process and simplifies the transfer of goods.

Under this system, the export identification number is the same as the import identification number. The basic system uses a 6-digit number to identify basic commodities.  Each country is allowed to add additional digits for statistical purposes.  In Canada an additional 2-digits are used for exports and an additional four digits for imports. For example, the tariff classification for non-coniferous flooring of maple is 4409.20.19.10. The first six digits are standardized or harmonized for all countries using the international tariff while the seventh and eighth digits represent Canadian trade purposes. The last two digits are used for statistical purposes.

There are a few ways to search for a classification number (HS Code) for your product. Statistics Canada allows you to search by commodity code on their website at http://www.statcan.ca/trade/scripts/trade_search.cgi.Another useful site is the APEC Tariff Database available at http://www.apectariff.org. Your free registration will allow you to search for HS Codes within APEC’s member countries using a variety of methods. Lastly, you can contact Canada Border Services Agency at 1-800-461-9999.

Please note that you should always verify with Canada Border Services Agency or your customs broker to ensure you have the proper HS Code for your product.

If you are uncertain of what tariff rate applies to your product, an Advanced Customs Ruling can be requested from Canada Border Services Agency. A tariff classification advance ruling is a written statement on the tariff classification of a particular product. This service is provided free of charge by Canada Border Services Agency. You may be required though to provide documentation on your product and possibly a sample. More information on the  Advance Ruling Program can be found at http://www.cbsa-asfc.gc.ca/E/pub/cm/d11-11-3/d11-11-3-e.html or by contacting Canada Border Service Agency at 1-800-461-9999. 

Tariff Treatment

Once the correct HS code has been found, the code can be used to determine a product’s tariff treatment. A search for tariff treatments can be accessed through Canada Border Services Agency at. http://www.cbsa-asfc.gc.ca/general/publications/tariff2005/tablewithamendments-e.html.The first 1 or 2 digits of your product’s HS Code indicates what chapter of the Customs Tariff document your product falls under. For example, the HS Code 6401911100 for riding boots can be found in chapter 64.

In ascending order, the lowest tariff treatment rates are for countries that are signatories under the following trade agreements: North America Free Trade Agreement (NAFTA), the Canada-Israeli Free Trade Agreement (CIFTA) and the Canada-Chile Free Trade Agreement (CCFTA). Goods originating from countries that are signatories to these agreements are generally levied none or significantly reduced tariffs.  

Reduced rates often apply to countries listed in the following agreements: United States Tariff (UST), Mexico Tariff (MT), Mexico-United States Tariff (MUST), Chile Tariff (CT), Canada-Israel Agreement Tariff (CIAT), and Canada-Costa Rica Tariff (CRT) or based on special tariff provisions such as the General Preferential Tariff (GPT), Least Developed Country Tariff (LDCT), Commonwealth Caribbean Countries Tariff (CCCT), Australia Tariff (AUT), and New Zealand Tariff (NZT).

Goods originating from countries that do not have a tariff arrangement with Canada are subject to the Most Favoured Nation (MFN) rate which can range between 8%-20%. By far the highest tariff rate is for countries that do not fall under any of the above categories. They have rates as high as 35%. These countries include North Korea and Libya . 

A list of countries and their relevant trade agreements with Canada can be found at the Canadian Border Services Agency website under ‘List of Countries and Applicable Tariffs Treatments’ at  http://www.cbsa-asfc.gc.ca/general/publications/tariff2005/tablewithamendments-e.html .

National Customs Rulings

If you are uncertain of what tariff treatment is applicable to your goods, it is possible to apply for a National Customs Ruling. A National Customs Ruling (NCR) is a written statement provided by Canada Border Service Agency to an importer or the importer’s agent who outlines how the department will apply specific provisions of existing customs legislation to an importation. NCRs are issued for tariff classification, value for duty, origin, and marking.

NCRs are provided as an administrative service for the convenience of importers. Although the department is not legally required to provide this service, they will respond to all requests for NCRs unless there are circumstances where it is not appropriate to issue an NCR such as it is not possible to determine all the material facts at the time of the request for the NCR, the request is hypothetical in nature or the request pertains to multiple goods such as the contents of commercial catalogues.

For more details about the  National Customs Rulings Program, visit http://www.cbsa-asfc.gc.ca/E/pub/cm/d11-11-1/README.html or call 1-800-461-9999

INFORMATION SERVICES

Step-by-Step Guide to Importing - Canada Border Services Agency (CBSA)
CBSA created a step-by-step guide to help small and medium enterprises (SMEs) that import goods occasionally or are importing for the first time. This tool demystifies the process of importing commercial goods into Canada.

The various steps of the guide are found under the following topics:

• Before importing
• Tariff classification, rate of duties and taxes
• Importing
• Adjustments and records
• Trade incentives and other information
• Appendix of Client Services Offices

For more information, please call 1-800-461-9999, see the document Step-by-Step Guide to Importing or visit CCRA's Web site at http://www.cbsa-asfc.gc.ca/sme/stepbystep/import/menu-e.html

Border Information Service (BIS) - Canada Border Services Agency
The Border Information Service - BIS is a computerized, 24-hour telephone service that automatically answers all incoming calls and provides general customs information.  With the help of a touch-tone telephone, clients can hear recorded information. If you are calling during office hours and need additional information on a particular topic, you can press "0" to speak to an agent.

For further information, please call 1-800-461-9999, see the document Border Information Service - BIS or visit the Web site at http://www.cbsa.gc.ca/eservices/bis/bis-e.html

Customs Client Services Offices - Canada Border Services Agency
The Customs Client Services Offices combine the services formerly offered by the Trade Administration Services and the Customs Border Services. They have been set up with a view to enhancing the global competitiveness of Canadian business on the international market, assisting business clients in complying with trade law requirements and making use of all the benefits available through Canada's international trade.

For further information, please call 1-800-461-9999, see the document Customs Offices - Supplement

Canadian Association of Importers and Exporters Inc. - CAIE
CAIE is a national organization committed to providing  support services of superior value and developing the trade activities of its membership. The Association is a private, non-profit organization, which has been servicing Canadian importers since 1932. The Association is Canada's key source of information on Canadian trade policy and provides Canadian importers, both large and small, with critical information, effective representation to government and timely advice. Our mandate is to promote international trade. All members receive Importweek, Canada's only national weekly publication for importers.  In addition, the Association holds regular conferences on topical issues, providing members with the latest information from industry experts and key senior-level government officials.

For further information, please call (416) 595-5333, or visit the Web site at http://www.importers.ca

Customs Automated Data Exchange - (CADEX) - and Customs Declaration - CUSDEC - Canada Border Services Agency (CBSA)
CADEX and CUSDEC are electronic data interchange (EDI) systems offered by the Canada Border Services Agency which allow importers and brokers to file customs accounting documents (B3 forms) electronically.

CADEX and CUSDEC also offer centralized accounting privileges and can send accounting information to clients. Other features include data transmission for notification of customs release, overdue entries and classification. The system also includes information on tariffs, GST and excise tax rate changes on commodities.

For further information, please call 1-800-461-9999 , or see the document  Customs Automated Data Exchange - CADEX - and Customs Declaration - CUSDEC

Customs Internet Gateway
The Customs Internet Gateway is an alternative way of transmitting customs data. For information, contact the Electronic Commerce Unit at 1-888-957-7224 or visit the Web site at http://www.logisticssoftware.com/main.html

Trade Data - Statistics Canada
Statistics Canada maintains records related to sales, inventories and operating data for retail and wholesale businesses and the number and value of new motor vehicles sold in Canada. Statistics Canada also maintains detailed trade date by commodity or industry and records related to exports and imports on a customs basis.

The on-line catalogue of products and services is available at: http://www.statcan.ca/english/search/ips.htm

For further information, please call 1-800-263-1136, see the document  Trade Data and Statistics or visit Statistics Canada's Web site at: http://www.statcan.ca

Trade Data Online - Industry Canada
Trade Data Online is a product designed to facilitate access to Canadian and U.S. trade statistics by commodity (HS code), industry (SIC code) and geographical location.

For further information, please call 1-800-328-6189, see the document Trade Data Online or visit the Web site at http://strategis.gc.ca/tdo

Canadian Importers Database - Industry Canada
Canadian manufacturers and primary goods producers can find out the names and locations of the major companies importing specific products into Canada.

For further information, please call 1-800-328-6189, see the document Canadian Importers Database or visit the Web site at http://strategis.gc.ca/sc_mrkti/cid/engdoc/index.html

Food Import - Canadian Food Inspection Agency (CFIA )
The Canadian Food Inspection Agency (CFIA) provides services and resources to assist Canadian food importers. These services include the Import Service Centres, the Automated Import Reference System, and a variety of guides that provide valuable information on importing foods into Canada.

The CFIA Web site contains a vast amount of information on importing food into Canada. They provide information on import by commodity, import procedures, and useful guides that are designed to assist food importers. Example of available guides are:

• Guide to Importing Food Commercially
• Good Importing Practices
• Food Recalls - Importers Guide

For more information, you may see the document Food Import or visit the CFIA's Web site at http://www.inspection.gc.ca/english/toc/importe.shtml

Trade Facilitation Office Canada (TFOC)
Trade Facilitation Office Canada (TFOC) is a not-for-profit organization, funded by the Canadian International Development Agency, that helps exporters from developing countries and from central and eastern Europe to find markets in Canada.

TFOC services available to qualified importers include:

• access to information on the TFOC database of 2,000 exporters from client countries;
• access to incoming missions of exporters; and
• opportunity to participate in outgoing missions of Canadian importers to client countries.  

Canadian importers who wish to tie into these new foreign sources of a variety of products may do so by completing a registration form (Profile Form) at http://www.tfoc.ca/tfoc/cdn_importers_register.htm

For further information, please call (613) 233-3925 or (in Canada) 1-800-267-9674, see the document Trade Facilitation Office Canada or visit the Web site at http://www.tfoc.ca

Translation Services - Alberta Intergovernmental and Aboriginal Affairs
The Translation Bureau provides information to the Private Sector by locating the required translators and/or interpreters in a specific language combination.  Information on price per word paid within Canada can be obtained through the Bureau as well.

For further information, please call (780) 422-1658, see the document Translation Services or Email: hms@inter.gov.ab.ca

INTERNATIONAL TRADE

North American Free Trade Agreement (NAFTA) - International Trade Canada (ITCan)
NAFTA came into force on January 1, 1994. As of January 1, 2003, the agreement eliminates tariffs on nearly all qualifying goods among Canada, Mexico and the United States. NAFTA provides secure access for Canadian exports to the U.S. and Mexico. Canadian business people and the general public may get printed information about NAFTA from ITCan and other government departments.

For further information, please call 1-800-461-9999, see the document North American Free Trade Agreement (NAFTA) or visit the Web site at http://www.dfait-maeci.gc.ca/tna-nac/reg-e.asp

Advance Rulings Program - Canada Border Services Agency
The Advance Rulings Program provides nationally binding rulings on how the North American Free Trade Agreement (NAFTA), the Canada-Chile Free Trade Agreement (CCFTA) and the Canada-Israel Free Trade Agreement (CIFTA) apply to future imports of goods into Canada.

For further information, please call 1-800-461-9999, see the document Advance Ruling Program or visit the Web site at http://www.cbsa-asfc.gc.ca/E/pbg/cf/b227

REGULATIONS

Duty Deferral Program - Duty Drawbacks - Canada Border Services Agency
This program helps Canadian companies compete in export markets by allowing them, under special circumstances, to recover duties they paid on imported goods. (You cannot recover GST payments under this program.)

Canadian companies may recover import duties (but not GST) under the following circumstances: export of Canadian manufactured goods; import and subsequent export of goods; destruction of obsolete or surplus goods.

For further information, please call 1-800-461-9999, see the document Duty Deferral Program - Duty Drawbacks or visit the Web site at http://www.asfc-cbsa.gc.ca/import/dutydeferral-e.html

Export and Import Permits Act - Import Permits - International Trade Canada - ITCan
Import Permits are issued under the authority of the Export and Import Permits Act . The Export and Import Controls Bureau (EICB) of International Trade Canada is responsible for assisting importers to determine if import permits are required. They also publish brochures and Notices to Importers that are freely available on request.

The importation of goods on the Import Control List to Canada for commercial or personal purposes is controlled by a series of quotas and import licenses. In order to import these goods, you must obtain in most cases, an import permit.

For further information, please call (613) 996-3711, see the document Import Permits or visit the Web site at http://www.international.gc.ca/trade/eicb/general/general-en.asp

Business Number - Canada Revenue Agency
All Canadian individuals or businesses importing on a commercial basis have to obtain a Business Number in order to account for their goods. Foreign-based or non-resident importers are also required to obtain a Business Number. The CRA uses this number to identify a business and to process Customs accounting documents such as: corporate income tax; import / export; payroll deductions; goods and services tax / harmonized sales tax (GST / HST). A Business Number consists of 15 characters. The first nine (9) numbers identify the business, the remaining six (6) characters identify the account.

For further information, please call 1-800-959-5525, see the document Business Number - BN or visit the Web site at http://www.cra.gc.ca/bn

Product Safety - Health Canada
Consumer Product Safety encourages the design of safer products for the Canadian market by providing importers and manufacturers with hazard and product technical information such as: Chemical hazards - consumer chemical products like detergents, paints, solvents and glues; Flammability hazards - textile products like children's sleepwear, clothing, tents, bedding and mattresses; matches and cellulose insulation; and Mechanical hazards - entrapment, entanglement, strangulation, choking and puncture hazards in children's products like toys, cribs and bunk beds; products destined for household, garden or recreational use.

For more information, please visit Health Canada's Web site at http://www.hc-sc.gc.ca/cps-spc/index_e.html

Tariff Classification of Imported Goods - Canada Border Services Agency
Canada uses the international Harmonized Commodity Description and Coding System (HS) to classify imported goods. This classification system determines applicable customs duty rates and it provides statistical data. The HS system is also used to determine if any of the following apply: prohibitions; quotas; anti-dumping or countervailing duties; NAFTA provisions; other preferential tariff treatments.

For further information, please call 1-800-461-9999, see the document Tariff Classification of Imported Goods

Temporary Importation / Exportation Programs - Canada Border Services Agency
All goods entering Canada, even those being imported temporarily or those goods which were exported temporarily, are subject to duty and tax on their full value, unless there is a provision to relieve the duties and taxes owing.

For further information, please call 1-800-461-9999, see the document Temporary Importation/Exportation Programs

Valuation of Imported Goods - Canada Border Services Agency
To find out how much duty and tax to apply to a good, importers first have to know how much the good is worth.  Canada Customs and Revenue Agency's Valuation Division and regional Customs Client Services, applying the duty provisions of the Customs Act, make these decisions.

For more information, please call 1-800-461-9999 or see the document Valuation of Imported Goods

Protective Measures for Canadian Products against Unfair Foreign Competition - Canada Border Services Agency
The Canada Border Services Agency administers the Special Import Measures Act (SIMA) and imposes duties on imported goods when they are dumped or subsidized in a way that harms Canadian producers.

For further information, please call 1-800-461-9999, see the document Protective Measures for Canadian Products Against Unfair Foreign Competition or visit the Web site at http://www.cbsa-asfc.gc.ca/sima

Administrative Monetary Penalty System (AMPS) - Canada Border Services Agency
The proposed Administrative Monetary Penalty System (AMPS) is a graduated system of administrative monetary penalties for failure to comply with Customs legislative, regulatory or program requirements. It will provide a flexible and effective sanctions regime necessary to ensure and preserve the public trust in the fairness and integrity of the Customs program.

For more information, see the document Administrative Monetary Penalty System (AMPS) or visit CCRA's Web site at http://www.cbsa-asfc.gc.ca/amps

Labelling
 
Non-Food - Industry Canada
Under the Consumer Packaging and Labelling Act, the Competition Bureau administers the packaging and labelling of prepackaged non-food products at all levels of trade.

For further information, please call 1-800-348-5358, see the document Labelling - Packaging Consumer Products (Non-Food) or visit Industry Canada's Web site at http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=1436&lg=e

Textiles - Industry Canada
The Competition Bureau administers the Textile Labelling Act and the Canadian Care Labelling Program at all levels of trade. The Textile Labelling Act and the Textile Labelling and Advertising Regulations specify the requirements for the labelling and advertising of consumer textile articles.

For further information, please call 1-800-348-5358, see the document Labelling - Textiles or visit Industry Canada's Web site at http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=1533&lg=e

Food Labelling - Canadian Food Inspection Agency
The Canadian Food Inspection Agency administers the federal labelling requirements for prepackaged foods under the Food and Drugs Act and Regulations and the Consumer Packaging and Labelling Act and Regulations.

For further information, please call 1-800-442-2342, see the document Food Labelling or visit the Web site at http://www.inspection.gc.ca/english/toc/labetie.shtml

For more information about Importing, look at the following booklet  "A Guide for New Importers" on The Business Link Business Service Centre website at http://www.cbsc.org/alberta/exportlink/GuideforNewImporters.pdf

• Customs Offices - Supplement

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

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Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.