When Canada, the United States and Mexico announced that they had reached an agreement to amend the North American Free Trade Agreement (“NAFTA”), one of the important changes was an increase to the de minimis threshold. The de minimis threshold is the monetary value for courier shipments that can enter Canada without payment of duties and taxes.
On May 2, 2020, the Canada Border Services Agency (“CBSA”) posted Customs Notice 20-18 “Implementation of the Canada-United States-Mexico Agreement (CUSMA) De Minimis Thresholds with Respect to Customs Duties and Taxes for Courier Imports” in which the CBSA clarified the de minimis thresholds that will be in effect starting on July 1, 2020 (the date that CUSMA (aka USMCA, NAFTA 2.0) entered into effect).
The de minimis rules apply based on the place of direct shipment, and not based on where the goods originate. Courier companies do not need to apply the CUSMA/USMCA rules of origin to determine whether the lower de minimis thresholds would apply – this would undermine the intention to expedite low value shipments. Goods shipped from the United States or Mexico that do not meet the CUSMA rules of origin will be subject to the higher de minimis threshold rules below.
However, goods that are transshipped through the United States or Mexico that do not enter the commerce of the United States or Mexico will be subject to lower de minimis thresholds applicable to other countries. Also, goods that were manufactured in the United States that are transshipped or shipped from another country (other than Mexico) will be subject to lower de minimis thresholds applicable to other countries.
The word “courier” means a commercial carrier that is engaged in scheduled international transportation of shipments of goods, other than goods imported by mail.
- Goods entering Canada from the United States or Mexico by courier: If a consumer is the importer of record and if the value of the shipment is $CDN 150.01 or above, customs duties, goods and services tax (“GST”), harmonized sales tax (“HST”) and/or provincial sales tax (“PST”) will be payable. Certain types of imported goods are excluded from the rule.
- Goods entering Canada from the United States or Mexico by courier: If a consumer is the importer of record and if the value of the shipment is between $CDN 40.01 and $CDN 150.00, customs duties will not be payable but, GST, HST and/or PST will be payable. Certain types of imported goods are excluded from the rule.
- Goods entering Canada from the United States or Mexico by courier: If a consumer is the importer of record and if the value of the shipment is $CDN 40.00 or less, customs duties, GST, HST and/or PST will be waived.
- Goods entering Canada from the United States or Mexico by courier: If a business is the importer of record and if the value of the shipment is $CDN 150.01 or above, customs duties and GST will be payable.
- Goods entering Canada from the United States or Mexico by courier: If a business is the importer of record and if the value of the shipment is between $CDN 40.01 and $CDN 150.00, customs duties will not be payable, but GST will be payable. Certain types of commercial transactions and imported goods are excluded from the rule and customs duties will be payable.
- Goods entering Canada from the United States or Mexico by courier: If a business is the importer of record and if the value of the shipment is $CDN 40.00 or less, customs duties, GST, HST and/or PST will not be payable.
- Goods entering Canada from any country (other than the U.S. and Mexico) by courier: If a consumer is the importer of record and if the value of the shipment is over $CDN 20.01, customs duties, GST, HST and/or PST will be payable.
- Goods entering Canada from any country (other than the U.S. and Mexico) by courier: If a business is the importer of record and if the value of the shipment is over $CDN 20.01, customs duties and GST will be payable.
- Goods entering Canada from any country (including the U.S. and Mexico) by courier: If a consumer or business is the importer of record and if the value of the shipment is under $CDN 20.00, customs duties, GST, HST and/or PST will not be payable.
- Goods entering Canada from any country (including the U.S. and Mexico) by mail: The postal rules continue to apply and the CUSMA de minimis threshold does not apply. In other words, shipments by mail will be subject to the lower $CDN 20.00 threshold.
- Goods entering Canada from any country (including the U.S. and Mexico) in the possession of a person: The personal exemption limits have not changed.
- Exception – Goods: Customs duties, excise tax and GST/HST/PST will not be waived on alcohol, tobacco products, and cannabis. See definition of “goods” in section 2 of the Commercial Imports Remission Order.
- Exception – Commercial Transactions: Customs duties, excise tax and GST/HST/PST will not be waived on certain commercial transactions:
- imported goods that are purchased from a retailer in Canada and shipped to the purchaser directly from a place situated out of Canada;
- imported goods that are purchased or ordered through or from an address, a post office box or a telephone number in Canada; and
- goods that are imported by a person other than the person in Canada who ordered or purchased the goods.
See section 3 of the Commercial Imports Remission Order.
- Anti-Avoidance Rule: The value for duty must reflect all items in the order by the customer that are to be imported. An order cannot be broken into multiple shipments in order to effectively increase the de minimis threshold. In other words, if a consumer purchases goods from a U.S.-based e-retailer for $CDN 250.00 and the order is broken into two shipments of $CDN 125.00 and $CDN 125.00, customs duties and GST/HST/PST would apply. However, if the consumer places two separate orders that are each valued at under $CDN 150.00, then the customs duties would be waived and the GST/HST/PST would not be waived. If a consumer places two separate orders for under $CDN 40.00, then customs duties and GST/HST/PST would be waived on both orders.
Cyndee Todgham Cherniak is the founding lawyer of LexSage in Toronto.