A Canadian business that plans to import goods from one of Canada's free trade agreements partners (United States, Mexico, Chile, Israel, Costa Rica, Peru, Iceland, Norway, Lichtenstein and Switzerland) may ask for an advance ruling to minimize assessment risk (that is, risk of finding out later than the certificate of origin was incorrect and having the CBSA deny beneficial FTA tariff treatment). Canada's advance rulings program helps importers minimize assessment risk as the answers are provided by the Canada Border Services Agency (CBSA) before goods are imported into Canada. This is important because the Canadian importer is responsible for making correct declarations to the CBSA and will be liable for errors. In many cases, the free trade agreement benefit is a lower customs duty rate than Canada's GPT or MFN rate of duty. As a result, if the goods are not considered by the CBSA to be originating, beneficial tariff rates are reversed and additional duties, interest and penalties are imposed.
Section 42.1 of the Customs Act (Canada) establishes an advance ruling program for importers to verify in advance (1) whether goods qualify as originating, and (2) tariff classification of to be imported from a FTA partner. The entitlement to use this program is limited to "before goods are imported, on application by any member of a prescribed class that is made within the prescribed time, in the prescribed manner and in the prescribed form containing the prescribed information".
The Free Trade Agreement Advance Rulings Regulations set out the prescribed classes, prescribed timing, prescribed manner and prescribed information. For a copy of the Free Trade Agreement Advance Rulings Regulations, please go to the following link - http://laws-lois.justice.gc.ca/eng/regulations/SOR-97-72/FullText.html
The following classes of persons are entitled to ask for advance rulings:
1. importers of goods proposed to be imported into Canada from a free trade partner;
2. persons who are authorized to account for those goods proposed to be imported into Canada from a free trade partner under paragraph 32(6)(a) or subsection 32(7) of the Act;
3. exporters and producers of those goods proposed to be imported into Canada from a free trade partner in a free trade partner other than Canada;
4. where the goods proposed to be imported into Canada from a free trade partner are produced in a NAFTA country other than Canada, in Chile or in Costa Rica, producers in a NAFTA country other than Canada, in Chile or in Costa Rica, of a material that is used in the production of those goods; and
5. where the goods are produced in Israel or another CIFTA beneficiary, producers in Israel or another CIFTA beneficiary or in the United States of a material that is used in the production of those goods.
If a person is not on the list, then they must use the other advance ruling process.
The advance ruling must be submitted to the Canada Border Services Agency (CBSA) at least 180 days prior to the time the goods will be imported into Canada.
There is no prescribed form per se. A letter to the CBSA will be sufficient. The letter must be written in English or French.
The letter must contain sufficient information to enable the CBSA to make the requested ruling. This is where prescribed persons have the greatest difficulties as relevant information is missing and delays the issuance of a ruling.
The advance ruling will be effective as of the date the advance ruling is issued or a later date if the later date is specified in the ruling. An advance ruling shall apply to goods that are the subject of the advance ruling and are imported on or after the effective date of the advance ruling. An advance ruling shall remain in effect and shall be honoured by the Minister if (a) there is no change in the material facts or circumstances on which it is based; (b) all of its terms and conditions are complied with; and (c) it has not been revoked.
Modification or Revocation
The CBSA may modify or revoke a ruling after it has been issued after informing the person who originally requested the advance ruling. An officer shall give notice in writing of any modification or revocation of an advance ruling and of the effective date of the modification or revocation to the person to whom the advance ruling was given.
For more information, please contact Cyndee Todgham Cherniak, a Canadian customs lawyer at 416-307-4168.