Recent Trade & Tariff Perspectives

October 5, 2022  |  Monika Zanacan Manager, Trade Policy

container being loaded onto an ocean-going vessel 
What You Need to Know About Canadian Duty Drawback

For every item brought into Canada, companies must pay taxes and potentially customs duties. These costs can quickly add up over time. A properly managed Canadian duty drawback program offers a way to recover duty incurred under certain conditions.

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Audio file for what you need to know about Canadian duty drawback
What is a duty drawback?

In simple terms, a duty drawback is the return of customs duties paid on imported goods in certain circumstances. It is the procedure that provides for a refund of duty when goods that have been duty paid are then re-exported.

With lower input costs, Canadian manufacturers who meet the requirements of the program can develop, expand, and improve their manufacturing capacity and the efficiency of Canadian industry. This results in a more competitive selling price that enables Canadian goods to compete with lower-priced foreign manufactured goods. Therefore, the duty drawback program is an incentive for domestic manufacturers who produce goods for export.

Who may apply?

This program may be relevant if you are an importer, exporter, processor, owner, or producer of goods that were subject to duties at the time of importation and have been subsequently exported from Canada. After the goods have been exported from Canada, a claim for a drawback of the duties paid on the imported goods may be filed.

Where more than one person is eligible to file a claim, the claimant must secure a waiver from all other eligible claimants waiving their rights to claim a drawback (Form K-32A or Form K-32B). Successful application depends on meeting one of the following conditions:

  1. Goods that are imported to be displayed or demonstrated in Canada and subsequently exported in the same condition.
  2. Imported goods are used to produce other goods for export, such as in the case of materials/ingredients/parts used to manufacture a new product.
  3. Goods that are imported to be used for the development or production in Canada of goods subsequently exported.
  4. Imported goods that have been imported and exported without having been used in Canada for any purpose other than for any of the above reasons.
  5. Obsolete or surplus goods that are imported are subsequently destroyed rather than being sold in Canada or exported.
Eligible goods

There are very few limits on what goods qualify under the duty drawback process, almost all goods categories are eligible for some degree of drawback. Goods, other than fuel or plant equipment, consumed or expended in the direct manufacture of other goods that are subsequently exported from Canada, may be eligible for drawback according to the regulations.

Canada–United States–Mexico Agreement (CUSMA) restrictions

CUSMA places limits on the amount of customs duties and anti-dumping and countervailing duties under the Special Import Measures Act (SIMA), refundable by way of drawback for goods exported from one CUSMA country to another. CUSMA does not affect goods and services tax (GST) relief, GST deferral, or GST Input Tax Credit refund processes.

Only certain goods are affected by the limitations on the duty drawback program. The CUSMA changes affect imported, non-CUSMA originating goods (or goods substituted with identical or similar goods) that are used in the production of another good that is exported to a CUSMA country. For exported goods affected by the limitations, drawback of customs duties cannot exceed:

  1. The lesser of the total amount of customs duties paid or owed on the goods imported into Canada.
  2. The total amount of customs duties paid on the exported goods in the CUSMA country where the goods were imported.

This is known as the "lesser of the two duties" concept.

How to apply

To file a claim, complete Form K32, Drawback Claim, and submit it with supporting documentation to the nearest Canada Border Services Agency office. The supporting documentation could include, but is not exclusive to:

  • A copy of export sales invoice
  • Bill of landing or other shipping document
  • Other proof of export as requested by Canada Border Services Agency
  • If you are not the importer, a waiver on commercial documentation or original and copy of any: Form K-32A, Certificate of Importation, Sale, or Transfer
  • If you are not the exporter, waiver on commercial documentation or original and copy of any: Form K-32B, Drawback Certificate of Sale for Exportation
  • Evidence if your exports are affected by NAFTA

In the case of goods or products that are destroyed because they are surplus or obsolete, Form E15, Certificate of Destruction/Exportation is also required.

Filing time limits

A claim for drawback must be filed within four years of the release date of the imported goods. In the case of spirits used in the manufacture of exported distilled spirits, a claim must be filed within five years of the release date. The goods must be exported or deemed to be exported before a claim may be filed with the Canada Border Services Agency (CBSA).

Next steps

If you’re ready to claim what’s yours and possibly get cash back, contact C.H. Robinson’s drawback department. Our experts can help answer all your duty drawback questions, provide a better understanding of the requirements and incentives of the CBSA’s duty drawback program, and create a customized, fully managed solution based on your specific needs to help ensure your drawback project is processed in a compliant and timely manner. Connect with one of our trade policy experts to learn more.

Our information is compiled from a number of sources that to the best of our knowledge are accurate and correct. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information published herein.

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