Most people would say yes, but a recent Federal Court of Appeal decision might make us think twice about the answer to this question. In the case referred to, the importer relied on a ruling issued by the Canada Border Services Agency (CBSA) and as a result, was refunded duty (by way of drawback). This ruling was later replaced with a new ruling, and the CBSA demanded repayment of the duty that had been refunded. In the end, the Federal Court of Appeal agreed that CBSA’s request for repayment of the duty was reasonable.
In light of the circumstances of this decision, and that CBSA recently advised that they will begin to publish their rulings in January 2015, it seems like a good time to talk in some detail on the subject of CBSA Rulings and how you can ensure that you are protected by the ruling that was issued for your goods.
The Canada Border Services Agency (CBSA) has long offered the administrative service of providing rulings of the following types:
- Advance Ruling For Tariff Classification
- National Customs Rulings
- Advance Rulings for Origin Under Free Trade Agreements
What’s the difference between the types?
Advance Ruling for Tariff Classification (AR) – is a written statement on the tariff classification of a product. As the term would suggest, an AR is intended to be requested in advance of the import of the goods.
National Customs Ruling (NCR) – is a written statement by the CBSA outlining how provisions of existing customs legislation apply to an importation of a specific commodity. NCR’s can be requested concerning the valuation, origin or marking of goods (but, not for the application of an FTA preferential tariff treatment or marking under NAFTA). NCR’s are provided as an administrative service for the convenience and guidance of importers. There is no legal provision that requires CBSA to issue NCR’s.
Note: An NCR (for tariff classification or any of the above) may also result from a CBSA decision on an appeal filed by an importer or may be CBSA initiated in the course of an audit.
Advance Rulings for Origin Under Free Trade Agreements – is a written statement issued by the CBSA concerning the origin of a good under a free trade agreement.
Publication of Rulings by CBSA Beginning January 2015
The publication of advance rulings by the CBSA is intended to provide a resource to the importing community to assist with the tariff classification of their goods. Because you will now be able to see rulings that were issued to others, it is extremely important that you know an advance ruling benefits only the ruling recipient (or persons importing the good in question from the ruling recipient, if the ruling recipient is an exporter or producer). Although an importer may quote an advance ruling number that was issued to someone other than themselves, the CBSA is not bound to recognize and adhere to the ruling content with regard to that importation. But, a reference to the ruling on the import documents will make the CBSA aware that there is an advance ruling which “may” relate to the goods in question, which can be beneficial to you.
What if you don’t want your ruling published?
To respect the right to privacy, the CBSA will only publish rulings for which consent has been provided by the applicant. The requirement to indicate consent or no consent has been added to the list of information required by CBSA before they will issue a ruling.
Review of rulings by CBSA:
CBSA can chose to review a ruling at any time to ensure its’ continued validity. After review, they may retroactively revoke or replace an invalid or incorrect ruling. They do so when they determine that there was a change to, or was an omission to the material facts or circumstances on which the advance ruling was based. The replacement ruling would be considered in effect from the date of the initial importation of the goods covered by the replacement ruling, or such earlier or later date (if specified in the replacement ruling). This is similar to what happened in the scenario that lead up to the aforementioned Federal Court of Appeal Decision.
CBSA makes mistakes too:
If CBSA discovers that a ruling issued is incorrect due to a CBSA interpretive or administrative error, the ruling will be revoked and replaced with a revised ruling. In these cases, the agency will consider and treat the original incorrect ruling as being valid for the period beginning from the effective date the original ruling letter, to the date it is expired and replaced by a revised ruling with its own effective date.
Read between the lines:
You’ve read in the previous 2 paragraphs how CBSA deals with incorrect rulings issued as a result of their error versus “your” error. If you apply this reasoning to the chain of events leading up to the Federal Court of Appeal decision above, you may surmise that it was not CBSA who had erred in the original ruling. This is a very unfortunate situation for an importer to find themselves in, especially if they truly believed that they had done the right (and safe) thing by obtaining the ruling in the first place.
How can you protect yourself?
The last thing you want to do is find yourself in a position where you have already sold your goods for a price that excluded duty, only later to find out that the ruling that you used is invalid and CBSA assesses duty retroactively! Nor do you want to be found non-compliant and exposed to penalties by CBSA. So, how can you protect yourselves?
- Ensure that you provide complete and accurate information in support of your ruling request. In the absence of product literature or technical information, a physical sample of the good may be submitted with the ruling request. Physical samples can be particularly useful for those goods whose essential character is dependent on knowing the good’s precise composition and/or constituent elements, or when seeing or touching a physical sample will facilitate or expedite the classification of the good.
- It is your responsibility to advise CBSA of any changes to the information upon which the ruling was based. A simple change to the manufacturing process or the addition of one small ingredient in a product could change the HS classification, making your original ruling invalid, the goods subject to duties and possibly subject to penalties.
- Utilize a professional, like Cole International. When you need your car fixed, you don’t go to a baker or plumber, right? The same philosophy applies to your “Customs” needs. Customs is a complicated, intricate industry with significant consequences for errors.
In the ever-changing, increasingly complex world of international trade, it is better to be safe than sorry. With Cole International’s experienced Consulting department in your corner, assisting you through the ruling application process and beyond, you can be assured that your interests are protected. We encourage you to contact us to discuss your concerns and needs.
References and Contacts:
Cole National Consulting Manager: Cheryl Corbeil
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