Export Development Canada (EDC) defines tariffs as “taxes that governments put on goods coming in from another country.” Tariffs are usually imposed and collected by a country’s customs authority or agency when goods cross the border. In Canada, tariffs are collected by the Canada Border Services Agency (CBSA). The purpose of tariffs is to make imports more expensive and protect domestic industries, such as steel and aluminum products.

Who pays the tariff?

Responsibility for covering the tariff cost depends on the agreement between the buyer and seller. Buyers usually end up paying tariffs to the government on items they import into Canada. However, this cost is often passed on to consumers in the form of higher prices, or the seller may agree to cover all or some of the cost to make their pricing more competitive.

If you export goods outside Canada, your international customers may have to pay tariffs on the goods you sell to them.

How is the amount of the tariff determined?

Different goods have different tariffs. The amount of the tariff is typically expressed as a percentage of the value of the import and is generally determined by two things: the rules of origin, and the Harmonized System (HS) classification which is used by most countries, such as Canada and the United States.

Rules of origin

All internationally traded goods must have their origin, meaning a product source country, or where it’s from, declared when they go through customs at the point of import.

The rules of origin are international trade rules that determine the source country of a product or service destined for export. For example: did the product originate in the country where it’s manufactured or in the country where materials were grown or sourced? This affects whether it’s subject to tariffs.

Rules of origin are found in every Free Trade Agreement (FTA), such as the Canada-US-Mexico Agreement – referred to as CUSMA in Canada, and USMCA in the US – and the Canada-European Union Comprehensive Economic and Trade Agreement. If no FTA exists, the World Trade Organization (WTO) rules apply.

The Harmonized System (HS) classification 

Most countries publish a tariff schedule, which is a list of goods and their associated duties. In Canada this is the Custom Tariff Schedule. These goods are identified by the Harmonized System (HS) classification, an international customs system that assigns a unique six-digit HS code to each group of products, including food and raw materials, components of products and manufactured goods.

An HS code is an international standard for classifying globally traded products. Used by more than 200 countries around the world, along with rules of origin, they identify the duty and tax rates for specific types of products.

What’s the difference between a duty and tariff?

The words tariffs and duty are often used to describe the same thing. However, while all tariffs are duties, but not all duties are tariffs.

Simply put, duty is a broad term referring to any tax or fee imposed on goods imported into Canada, such as excise duties, tariffs, and other fees. Tariffs, however, are a specific type of tax, also referred to as an import duty or customs duty, specifically related to international trade. They are applied to imported or exported goods as part of a country’s trade policy.

What should businesses know about tariffs?

Knowing the HS code for goods you’re importing or exporting is the first step in determining if tariffs will apply to your business. You also need to look at the specific rules of origin for your exports.

Resources

Many resources are available to help, specifically:

• Canadian Export Classification: Look up the HS code for commercial goods for export.
• Rules of origin facilitator: Search for information on tariffs, trade agreements and rules of origin.
• Canada Border Services Agency: Look up the Canadian customs tariff for goods you’re purchasing from outside Canada.
• Canadian exporters can also use the Canada Tariff Finder for tariff information on specific products and countries where Canada has an FTA.
• The Government of Canada has additional online tools to search for tariffs by product and country.

More detailed information about tariffs and help for businesses can be found from Business Development Canada (BDC) and Export Development Canada (EDC).

Get legal help

There are many legal and financial factors involved with tariffs. Businesses should always consider consulting with a lawyer to ensure compliance with trade regulations and to understand the financial impacts. Lawyers can also help a business understand and navigate possible risks related to supply chain changes or changes in their workforce.

								
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