Canada Grants Customs Duty, GST/HST
and Excise Tax Relief for COVID-19
Emergency Goods
Written By: Cyndee Todgham Cherniak
Date: April 7, 2020
On March 16, 2020, the Canada Border Services Agency (“CBSA”) issued Customs Notice 20-08 “Imported Goods for Emergency Use in Response to COVID-19”, which discusses the circumstances in which customs duty and goods and services tax (“GST”) /harmonized sales tax (“HST”) and excise tax relief will be granted for Emergency Goods imported into Canada that will be used in the fight of COVID-19. The relief is granted regardless of origin of the Emergency Goods. Customs Notice 20-08 was updated on April 6, 2020.
Customs Notice 20-08 provides information on the use of the Goods for Emergency Use Remission Order (“the Order”), (C.R.C., c. 768), (the “Order”) and application of Tariff Item No. 9993.00.00 of the Customs Tariff in response to the COVID-19 pandemic. It is important to note that the Order is more broad than what is written in Customs Notice 20-08. Customs Notice 20-08 is the CBSA's interpretation of the Order and an indication as to how the CBSA will apply the Order.
Firstly, Tariff Item No. 9993.00.00 of the Customs Tariff will be used to grant customs duties relief for Emergency Goods. Emergency Goods (as set out in Customs Notice 20-08) are “goods required for an emergency and are imported by or on behalf of federal, provincial or municipal entities involved such as centres for health care as well as by or on behalf of members of first response organizations such as police, fire and local civil defence groups, including medical response teams.” As of April 6, 2020, the relief was extended to Emergency Goods "imported by or on behalf of public or private care residences, such as seniors’ residences, retirement homes, nursing homes and shelters." It is important to note that the Order does not contain restrictions on who can be the importer of the goods.
Based on the CBSA's interpretation of the Order, the goods must be imported by or on behalf of:
- a federal government of Canada entity (e.g., Public Services and Procurement Canada);
- a provincial or territorial government of Canada entity (e.g., the Ontario Ministry of Health);
- a municipal government entity (e.g., Toronto Hydro);
- a first response organization such as police, fire, civil defence groups, medical response teams (the list is not limited);
- public and private care residences, such as seniors’ homes, retirement homes, nursing homes and shelters; and
- persons importing on behalf of public and private care residences, such as seniors’ homes, retirement homes, nursing homes and shelters.
While there is a requirement that the governmental entities be involved in health care for the relief to be granted, it is expected that broad latitude will be given to this requirement. So many government entities are working cooperatively to respond to the COVID-19 pandemic that the procurement lines will not likely be restricted to direct health ministry procurements.
The CBSA indicates that persons not listed above are not entitled to the relief. Based on the CBSA's statement, for example, individuals who import face masks, hand sanitizer, UV equipment, etc. for personal use will not be entitled to the border taxes relief and will still have to pay the applicable duties and taxes for imported goods by courier/mail or in their luggage. At the present time, it appears that businesses with access to a foreign source of Emergency Goods and who import for the sole purpose of donating the Emergency Goods to a government body, a hospital, or a retirement home or other front-line operation are not able receive duty and taxes relief. Further, essential businesses who serve the public are not able to receive the duty relief. Many will be able to receive GST/HST relief by claiming input tax credits. As a result, grocery stores, pharmacies, truck drivers, courier companies, etc. cannot currently benefit from the relief as set out in Customs Notice 20-08. It is also not clear whether all forms private health care providers may utilize the relief. The April 6, 2020 clarification only applies to persons importing on behalf of public and private care residences, such as seniors’ homes, retirement homes, nursing homes and shelters. The use of the words “such as” suggests that the list is not limited. However, it does not appear to include unions who import Emergency Goods for the benefit of front line workers. We want to stress that this is based upon the CBSA's interpretation of the Order, which does not contain these restrictions.
Entities and persons not identified in Customs Notice 20-08 should seek a ruling if they wish to get relief from duties and taxes.
It is also not clear whether privately run medical facilities who import Emergency Goods would be able to receive the duty and tax relief. While Canada has public health care, there are private clinics.
That being said, goods imported from Canada’s free trade agreement partners most likely will receive preferential tariff treatment under a free trade agreement. For example, if a ventilator manufactured in the United States is imported from the United States, it will be duty free. Whether face masks and hand sanitizers are duty free will depend on the application of textile rules of origin.
Normally, Tariff Item No. 9993.00.00 grants temporary relief for goods that are to be re-exported. However, Customs Notice 20-08 provides that “all goods for which relief is granted, shall be exported from Canada whenever they are no longer required except goods that are consumed or destroyed during the emergency”. This means that goods that are consumed or destroyed during the COVID-19 pandemic will be granted relief if they are used and cannot be exported. Temporary Importation (Tariff Item No. 9993.00.00) Regulations waives the requirement to provide proof of export for goods consumed or destroyed in an emergency.
Second, the COVID-19 pandemic is considered to be an emergency for the purposes of the Goods for Emergency Use Remission Order. As a result, GST/HST and any other taxes applicable under the Excise Tax Act will be covered by the Goods for Emergency Use Remission Order. In other words, the CBSA will not collect GST/HST and excise tax on the imported emergency goods. Further GST/HST and excise tax will not become payable in the goods are used or destroyed during the period of emergency.
The CBSA is going to expedite the clearance of Emergency Goods. Customs Notice sets out the following instructions for paperwork to be used in connection with the Emergency Goods:
- A Form B3-3 is required; and
- At time of import, special authorization code 73-2529 is to be entered in field 26 and “9993” should be entered in field 28 of Form B3-3.
No security deposit will be collected by the CBSA for Emergency Goods.
The CBSA maintains the right to examine any importation of Emergency Goods and to post-release verifications may be conducted to ensure compliance with the Tariff Classification, Valuation, Origin and Marking programs, and any other applicable provisions administered by the CBSA. In other words, the paperwork still needed to be correct so that trade data can be gathered.
If you require more information or want assistance with ensuring that the correct tariff classification and valuation method is used and the correct rules of origin are applied, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.
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