Import Duties, Taxes & GST in Canada: What Importers Pay

What Importers Pay

The amount payable on a commercial import depends primarily on:

• What the goods are
• Their Canadian HS tariff classification
• Country of origin
• Applicable tariff treatment
• Value for duty
• Trade agreement eligibility
• Whether surtaxes or trade-remedy measures apply
• Whether the goods are subject to excise or other special taxes

Importers should also distinguish government charges from customs brokerage fees, freight, storage, and other commercial costs associated with bringing goods into Canada.

Understanding all of these components is essential when calculating the true landed cost of an imported product.

What Are Import Duties in Canada?

Customs duty is a tariff imposed on certain goods imported into Canada.

The applicable rate is determined using the product's Canadian tariff classification together with its country of origin and applicable tariff treatment.

Canada's Customs Tariff contains thousands of classifications, and duty rates vary substantially between products. Depending on the circumstances, imported goods may be:

• Duty-free
• Subject to the Most-Favoured-Nation tariff rate
• Eligible for a preferential tariff rate
• Subject to a reduced or zero rate under a free trade agreement
• Subject to surtaxes
• Subject to anti-dumping or countervailing duties
• Subject to excise tax or excise duty
• Affected by another special trade measure

The current Canadian Customs Tariff should be checked when determining the applicable rate because tariff provisions and special trade measures can change.

What Is GST on Commercial Imports?

Most taxable commercial goods imported into Canada are subject to 5% GST, or the 5% federal component of the HST, at the time of importation.

For commercial imports, this is an important distinction. A business importing commercial goods into Ontario does not generally pay the full 13% Ontario HST to CBSA at the border simply because the goods are destined for Ontario. The federal 5% component is generally collected at importation.

Separate rules can apply to the provincial component of HST depending on how imported goods are subsequently used or brought into a participating province.

Businesses with specific GST/HST questions should confirm their tax treatment with an accountant or qualified tax professional. The Canada Revenue Agency provides additional guidance on GST/HST and imported goods.

Are Customs Duty and GST the Same Thing?

No. Customs duty and GST are separate government charges calculated for different reasons. Customs duty is generally determined by:

• Tariff classification
• Country of origin
• Tariff treatment
• Value for duty

GST is a federal consumption tax that generally applies to taxable imported commercial goods. A shipment may therefore have:

• 0% duty + 5% GST
• Customs duty + 5% GST
• Surtax + 5% GST
• Customs duty + surtax + 5% GST
• Additional excise or trade-remedy charges
• No GST where a specific non-taxable import provision applies

This is why duty-free does not automatically mean tax-free.

How Are Import Duties and GST Calculated?

The calculation generally begins with four core questions:

• What is the product?
• Where does it originate?
• What is its value for duty?
• What tariff treatment and additional measures apply?

1. Determine the HS tariff classification

   The first major step is establishing the correct 10-digit Canadian tariff classification.

   The HS code identifies the product within Canada's Customs Tariff and helps determine the applicable duty rate and whether special tariff measures may apply. Classification can depend on:

   • Product function
   • Material composition
   • Technical characteristics
   • Manufacturing
   • How the goods are presented at importation
   • Section and Chapter Notes
   • The General Rules for Interpretation

   A supplier's foreign HS code should not automatically be assumed to be the complete Canadian classification.

   Our guide to HS Codes & Tariff Classification in Canada explains the classification process in detail.

2. Determine country of origin and tariff treatment

   Country of origin can materially affect the duty rate. Two identical products with the same tariff classification can receive different customs treatment if they originate in different countries.

   Canada maintains several tariff treatments, including preferential rates associated with free trade agreements and other tariff programs. For example, qualifying goods may be eligible for reduced or zero customs duty under agreements such as CUSMA or CETA.

   Eligibility is not determined merely by where the goods were shipped from. The product must satisfy the applicable rules of origin and any supporting documentation requirements.

   CBSA's Origin of Goods guidance explains the relationship between origin and tariff treatment.

3. Establish the value for duty

   Every commercial import requires a value for duty, even where the applicable customs duty rate is 0%. The value for duty is the customs value used as the basis for calculating ad valorem customs duties and certain other import charges.

   In many commercial transactions, the starting point is the price paid or payable for goods sold for export to Canada. However, Canadian customs valuation is more technical than simply copying the invoice total.

   The Customs Act establishes six valuation methods:

   • Transaction value
   • Transaction value of identical goods
   • Transaction value of similar goods
   • Deductive value
   • Computed value
   • Residual method

   The transaction value method is generally considered first when its requirements can be satisfied.

   Depending on the transaction, adjustments may also be required for items such as certain assists, royalties, proceeds, transportation costs, or other amounts. CBSA provides detailed guidance in its Customs Valuation Handbook.

4. Apply the customs duty rate

   Once the tariff classification, origin, tariff treatment, and value for duty have been established, the applicable customs duty can be calculated.

   For a simple percentage-based duty: value for duty × duty rate = customs duty. For example:

   Value for duty

   $10,000

   Duty rate

   6%

   Customs duty

   $600

   However, not all tariff provisions are simple percentage rates, and additional trade measures can materially change the amount payable.

5. Determine whether surtaxes or other measures apply

   Some imported goods are subject to additional duties or surtaxes beyond the normal customs duty rate. These can include:

   • Canadian surtaxes
   • Anti-dumping duties
   • Countervailing duties
   • Excise taxes
   • Excise duties
   • Special tariff measures

   These measures can create significantly higher import costs than the regular customs duty alone.

   Importers should therefore avoid estimating landed cost from the standard duty rate without checking whether additional measures apply to the product and country of origin.

   Canada's trade measures can change, so the current Canadian Customs Tariff and related CBSA notices should be reviewed when a shipment is being planned.

6. Calculate GST on the value for tax

   GST on commercial imports is generally 5%, but it is not always calculated on the invoice value alone. The GST calculation generally uses the value for tax. For a straightforward shipment:

   Value for duty + applicable customs duty and certain other federal import charges = value for tax, then value for tax × 5% = GST.

   Using the earlier example:

   Value for duty

   $10,000

   Customs duty

   $600

   Value for tax

   $10,600

   GST at 5%

   $530

   Total customs duty and GST

   $1,130

   Additional surtaxes, SIMA duties, excise taxes, or other applicable amounts can change this calculation.

   This is one reason businesses should obtain a shipment-specific estimate rather than relying on a generic online percentage.

Does a Surtax Increase the GST Payable?

It can. Where an applicable surtax forms part of the amounts included in the value for tax, GST is calculated after that additional charge is taken into account.

For example, if a product becomes subject to a significant Canadian surtax, the financial impact is not always limited to the surtax itself. The additional amount can also increase the GST payable on importation.

This has become particularly important as Canada has introduced and amended trade measures affecting certain imported goods.

Businesses importing products exposed to surtaxes should review the entire landed-cost calculation rather than looking only at the headline tariff percentage.

What Makes Imported Goods Duty-Free?

A product can enter Canada with a 0% customs duty rate for several different reasons.

The standard tariff rate is already 0%

Some tariff classifications carry a 0% Most-Favoured-Nation duty rate. In this situation, no special trade agreement may be necessary to obtain duty-free treatment.

A free trade agreement applies

Goods that satisfy the applicable rules of origin may qualify for preferential tariff treatment under one of Canada's trade agreements. Depending on the product and agreement, the rate may be reduced or eliminated.

However, the fact that goods were purchased from a U.S., European, or other preferential-trade partner does not automatically make them originating goods.

Another tariff provision provides relief

Certain tariff provisions, remission orders, duty-relief programs, temporary import provisions, or other programs may reduce or eliminate customs duties in specific circumstances. See Duty Drawback, Duties Relief and Refunds.

Even when customs duty is 0%, the importer should still determine whether GST, surtaxes, excise charges, or other requirements apply.

Can Commercial Importers Recover GST Paid at Import?

In many cases, a GST/HST-registered business may be eligible to claim an input tax credit (ITC) for GST paid or payable on imported goods used, consumed, or supplied in its commercial activities.

Eligibility depends on the facts of the transaction and the applicable GST/HST rules. The person entitled to recover the tax is not determined solely by whose name appears on a freight invoice.

Importer relationships involving non-residents, drop shipments, related companies, or third-party importers can become more complicated. Businesses should retain appropriate import documentation and discuss ITC eligibility with their accountant or tax advisor.

Import GST may therefore be recoverable for many commercial businesses, but customs duty generally represents a true landed-cost expense unless another customs-relief mechanism applies.

Are Customs Brokerage Fees Included in Duties and Taxes?

No. Customs brokerage fees are charges for professional services provided by the customs broker. They are separate from government duties and taxes.

A commercial import invoice may therefore contain several different categories of cost:

• Customs duty
• GST
• Surtaxes
• Anti-dumping or countervailing duties
• Excise charges
• Customs brokerage
• Additional tariff-line charges
• Disbursement or advancement fees
• Freight
• Warehousing
• Storage
• Delivery
• Other transportation charges

Importers should separate government amounts payable to CBSA from commercial service charges when analyzing the cost of an import.

Businesses comparing brokerage providers can review our Best Customs Brokers for Commercial Importers in Canada guide.

When Are Duties and Taxes Paid?

The timing depends in part on whether the commercial importer participates in the Release Prior to Payment program.

RPP allows eligible commercial importers to obtain release of goods before paying applicable duties and taxes. Under the current CARM framework, importers using RPP must maintain their own required financial security.

Importers that are not participating in RPP generally need to pay applicable duties and taxes at the time of release.

Businesses importing regularly should establish their Release Prior to Payment arrangements before shipments begin moving.

CBSA's current commercial import payment guidance explains Statements of Account, payment timing, and payment methods. Businesses still establishing their importer account can start with How to Register for CARM in Canada.

Who Is Responsible for Duties and Taxes?

The importer remains responsible for customs amounts associated with goods imported under its account.

A licensed customs broker can assist with classification, valuation, origin, tariff treatment, preparation of customs information, and submission of transactions to CBSA.

Using a broker does not transfer the importer's underlying responsibility for the accuracy of information provided to CBSA. This is part of the broader role explained in our guide to Importer of Record Responsibilities in Canada.

For recurring commercial importers, inaccurate information can become particularly costly because an error may be repeated across many transactions before it is discovered.

Common Duty and Tax Errors

Incorrect duty and tax amounts are often the result of problems earlier in the customs process. Common issues include:

• Incorrect HS tariff classification
• Incorrect country of origin
• Unsupported preferential tariff treatment
• Incorrect value for duty
• Currency conversion errors
• Missing valuation additions
• Assuming a supplier's HS code is correct for Canada
• Overlooking surtaxes
• Missing anti-dumping or countervailing measures
• Incorrect GST treatment
• Treating brokerage fees as customs duty
• Failing to correct recurring customs information when circumstances change

These errors can result in either overpayment or underpayment. Overpayment creates unnecessary landed cost. Underpayment can result in reassessment, interest, corrections, compliance reviews, and potential penalties.

Our guide to avoiding customs penalties in Canada explains several areas businesses should monitor.

Can Duties and Taxes Be Estimated Before Shipping?

Yes, in many cases. Commercial importers should ideally estimate duties and taxes before purchasing or shipping the goods, not after the shipment reaches Canada.

A useful estimate normally requires:

• Detailed product description
• Canadian tariff classification or enough information to determine it
• Country of origin
• Supplier
• Purchase price
• Currency
• Incoterms or terms of sale
• Transportation information where relevant to valuation
• Trade agreement information
• Permits or certificates
• Information about potential surtaxes or trade measures

The more complete the information, the more reliable the estimate can be. This is particularly important when importing high-value goods or products with substantial duty or surtax exposure.

A $500 difference in estimated charges on one shipment may be manageable. The same difference repeated across hundreds of transactions can materially affect annual landed cost.

Duties and Taxes Are Part of the Customs Declaration

The classification, origin, valuation, tariff treatment, and tax information used to determine the amount payable ultimately become part of the importer's customs accounting information. This connects duty calculation directly to the broader Canadian import declaration process.

The release and accounting stages should also be distinguished. The CBSA release process determines whether goods can move beyond customs control. Final accounting establishes the customs information and amounts associated with the transaction.

Under CARM, commercial importers must also manage account activity, Commercial Accounting Declarations, Statements of Account, payments, and applicable corrections. Our CARM & Import Compliance resource centre explains these requirements in more detail.

How Garden City Helps With Import Duties and Taxes

Garden City Customs Services Inc. has supported commercial importers since 1981.

Our Canadian customs brokerage services help businesses review and report the information required to determine customs duty, GST, and other import charges. Our team can assist with:

• HS tariff classification
• Country-of-origin review
• Tariff treatment
• Customs valuation
• Duty calculations
• GST calculations
• Surtax identification
• Review of applicable trade measures
• Commercial customs declarations
• CARM requirements
• RPP
• CBSA release processing
• Import compliance

For businesses importing recurring products, establishing accurate customs data can also improve landed-cost forecasting and reduce inconsistencies between shipments.

Garden City supports commercial shipments entering through ports across Canada under national customs broker licensing.

Businesses requiring deeper review of classification, valuation, origin, or compliance issues can also use our customs consulting services.

Need Help Estimating Import Costs?

If your business is preparing to import commercial goods into Canada, reviewing classification, origin, value, and applicable trade measures before shipment can provide a much clearer picture of the expected landed cost.

Garden City Customs Services Inc. can review your shipment information and help identify the customs requirements that may affect duties and taxes. Talk to a licensed customs broker.

Import Duties, Taxes & GST FAQ