Canadian businesses, small, medium and large import goods from China. It is a reality in a globalized supply chain. Many Canadian businesses buy Chinese-origin goods from suppliers in a third country (e.g., the United States). Most businesses understand that they must pay all applicable customs duties at the time of importation. Many companies understand that they must determine an H.S. Code for the goods prior to importation. However, many importers do not know to do the following three things:
- Determine whether antidumping and/or countervailing duties apply with respect to the goods to be imported;
- Determine whether the exporter knows to fumigate any wood packaging; and
- Determine whether trademarked goods are counterfeit.
Antidumping and/or Countervailing Duties
Always ask the exporter whether the goods are subject to antidumping and/or countervailing duties in Canada. However, never trust the answer provided because you, as the importer of record, will be the one who has to pay the antidumping and/or countervailing duties long after you paid for the imported goods. Always ask your customs broker (before you order the goods) whether the goods are subject to antidumping and/or countervailing duties. Also check the Canada Border Services Agency ("CBSA") website for current Special import Measures Act ("SIMA") orders in place. Ask more questions if the goods you would like to import look similar to a listed good on the CBSA website.
We are often called by importers who are shocked with a detailed adjustment statement (customs assessment) of 170% for fasteners (plus 1.25 RMB per kilogram), 101% for aluminum extrusions (plus 15.84 RMB per kilogram), 103.1% for stainless steel sinks (plus 264.94 RMB per unit), 85% for steel grating (plus 13,064 RMB per metric ton), etc.
Often the detailed adjustment statement arrives months after the goods are imported and in most cases the goods have been sold. There is no way to send the goods beck to China and the importer has no choice but to pay the assessment of SIMA duties. It is a very expensive lesson to ask questions.
Wood Packaging Fumigation Requirements
Canada requires that wood packaging from China be fumigated so that pests do not hitch a ride to Canada and damage our ecosystems. Proof of fumigation of wood packaging is required. If an importer does not have a properly completed fumigation certificate, the container will be returned to China. Often, the payment terms for Chinese goods require payment at the time of loading or shipment. As a result, the goods are paid for in full by the time they are inspected by the CBSA.
Make inquiries regarding wood packaging requirements and make sure you have as a material term of the contract that the exporter will provide valid paperwork regarding fumigation.
Canadian importers of goods that are subject to trademarks, patents and sometimes copyright (consumer goods and industrial goods) should undertake due diligence to ensure that any goods purchased from China are manufactured by the owner of the trademark, patent or copyright or a person licensed by the owner of the intellectual property to manufacture the goods. If the goods are subject to intellectual property protection and the owner has filed a request for assistance with the CBSA, the goods may be seized by the CBSA at the time of importation. A Request for Assistance is a new procedure in Canada that that allows intellectual property rights holders to file a request with the CBSA to request that the CBSA temporarily detain suspected counterfeit goods encountered at the border while rights holders seek legal redress.
Due diligence steps may include determining the identity of the intellectual property rights holder and asking your exporter if they have a license to manufacture or sell the goods. If the exporter has a website, look to see if they have evidence of a valid license to manufacture or sell the goods. Often the intellectual property rights holder has a list of licensed persons on their website and you may verify that your exporter is on the list.
If the samples provided have spelling errors (e.g, "Nike" is spelled "N1ke"), the goods are very likely to be counterfeit or manufactured in breach of the intellectual property rights holder's rights. If the prices are too low (the Gucci purses cost $10 per unit), the goods are most likely counterfeit. If the DVDs are sold in bulk and not individually packaged, it is very likely that the DVDs are pirated copies.
Counterfeiting is not restricted to high end consumer goods. Imports of counterfeit manufacturing inputs and parts are detained at the Canadian border. Counterfeit parts can be very dangerous because they most likely are not manufactured to the same quality standards as the authentic version. The CBSA will seize dangerous goods to ensure they stay out of the Canadian supply chain.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.