4 Steps to Claim Preferential Tariffs Under Free Trade Agreements

4 Steps to Claim Preferential Tariffs Under Free Trade Agreements

June 25, 2021 Posted by Williamson, Daniele

 
True or False? It’s the importing country’s responsibility to identify preferential tariff treatment for B.C. exporters


False! Canada’s free trade agreements (FTA) offer British Columbia businesses preferential tariff reductions in international markets. But, did you know the importing country does not automatically apply those preferential treatments to your goods at the border? You need to claim those benefits by referencing the preferential origin of your product that allows you to claim the preferential tariff. Let’s break it down:
 
Suppose an experienced exporter or a new to exporting company doesn’t know that they are eligible for preferential tariff relief under an FTA, and the company doesn’t claim the benefit. In that case, they miss out on cost savings that could give them a competitive edge over their international competition. Businesses must take a few extra steps and claim FTA benefits.
 

First, classify your product

Determine how the country you are exporting or importing to will classify your product. The Harmonized System (HS) Code is used to classify goods. HS codes are an international standard maintained by the World Customs Organization that classifies traded products. The first six digits of an HS code represents the product internationally, but individual countries may add additional digits to classify that country's unique product subcategories for customs and export purposes. HS codes can be up to ten digits long and these extensions are often country specific. Accuracy is necessary – use the wrong country subcategory code, and you miss out on claiming preferential tariff, reductions! To make sure your product is accurately classified, consult customs broker, or seek legal advice. 
 

Second, determine the tariff rate

Visit the Canada Tariff Finder (tariffinder.ca) to check your product’s classification in a specific market and find out if your product benefits from preferential access. This free tool helps identify relevant tariffs on goods destined for, or originating from, a country where Canada has an FTA. 
 

Third, find out if your product meets the country’s rules of origin

"Made in Canada" and "Country of Origin" aren't necessarily the same thing. In today's global economy, it's not uncommon for a product to be manufactured in Canada but made with raw materials or components from another country. It's up to the business to track these sources and provide a document to show the product meets rules of origin under each FTA.

FTAs define rules that products must follow to qualify as “originating in” a country. If your product is made of imported materials or components and you intend to export it to a country where Canada has an FTA, your product will need to undergo sufficient production or have only a limited share of non-originating materials in order to benefit from the preferential tariff under the FTA. The rules of origin are very detailed, product- and FTA-specific. If you are not sure, seek legal advice or ask the customs authority of the country you are exporting to for an advance ruling to determine if your product meets the rules of origin under a specific FTA. Each country publishes information on how to request an advance ruling. A freight forwarder or customs broker may also be able to help.

Each FTA specifies in which form information about the product origin shall be provided. Formats may differ, but usually will need to cover essential information (for example, certifier, exporter and importer contact details, tariff classification, origin criteria, blanket period) and the certifier should save the document in the event of an audit. 
 

Finally, claim the preferential FTA tariff treatment at the country border 

Once you know the HS code for your product, and you have determined that  your product meets the rules of origin criteria, you are all set to claim the preferential tariff at the border of the country where the goods are  exported.
 

TIP: Double-check before you ship your products! Ask the country you are exporting to for an Advance Ruling to ensure you will be providing the correct HS code and comply with the rules of origin for preferential treatment. 
 

4 Steps to Claim Preferential Tariff Treatmemt [PDF]


Use the Canada Tariff Finder to find the HS code

The Canada Tariff Finder tool makes it easy to find the full product HS code and Tariff Schedule. All you need to know to use the tool is if you are exporting or importing, the country you are trading with, and your product (either by keyword or by the four-digit HS code).

Select a country. The tool only includes countries with which Canada has an FTA.

Describe your product. You can use words, for example, “honey”, or the HS code.

Narrow the product sub-categories. The tool will prompt you with a series of questions, based on the foreign country’s requirements, to define the product sub-category.

Voila! In one easy search the Canada Tariff Finder shows you the benefits for your product.  You will see the countries Most Favoured Nation (MFN) tariff rate that is generally applicable to products from countries that are members of the World Trade Organization, but that do not have a FTA with Canada or Canada’s FTA partners.

Check out this video from Global Affairs Canada, the Canadian Trade Commissioner Service and partners about the Canada Tariff Finder tool.
 

TIP: Are you researching which countries offer you the most favourable tariff rate on your export product? The Canada Tariff Finder tool allows you to compare tariff rates for your product in multiple export markets with different FTAs.

 
More resources for trade focused B.C. Companies

For more information on Canada and British Columbia’s free trade agreements register for a FREE virtual information session on Canada and B.C.’s free trade agreements.

Follow Trade and Invest BC on LinkedIn or Twitter for regular updates.
 

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