Order Amending the Schedule to the Customs Tariff, 2022-2: SOR/2023-41
Canada Gazette, Part II, Volume 157, Number 7
Registration
SOR/2023-41 March 9, 2023
CUSTOMS TARIFF
P.C. 2023-186 March 9, 2023
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Order Amending the Schedule to the Customs Tariff, 2022-2 under paragraph 14(1)(a) of the Customs Tariff footnote a.
Order Amending the Schedule to the Customs Tariff, 2022-2
Amendments
1 Tariff item No. 2404.11.00 in the List of Tariff Provisions set out in the schedule to the Customs Tariff footnote a is repealed.
2 Tariff item No. 2404.11.00 in the List of Intermediate and Final Rates for Tariff Items of the “F” Staging Category set out in the schedule to the Act is repealed.
3 The List of Tariff Provisions set out in the schedule to the Act is amended by adding, in numerical order, the tariff provisions set out in Part 1 of the schedule to this Order.
4 The List of Intermediate and Final Rates for Tariff Items of the “F” Staging Category set out in the schedule to the Act is amended by adding, in numerical order, the tariff items set out in Part 2 of the schedule to this Order.
Coming into Force
5 This Order comes into force on the day on which it is registered.
SCHEDULE
(Sections 3 and 4)
PART 1
| Tariff Item | Description of Goods | Most-Favoured-Nation Tariff | Preferential Tariff | ||
|---|---|---|---|---|---|
| Initial Rate | Final Rate | Initial Rate | Final Rate | ||
| 2404.11.10 | -- Containing homogenized or reconstituted tobacco | 13% | 13% (A) | UST: Free | UST: Free (A) |
| MXT: Free | MXT: Free (A) | ||||
| CT: Free | CT: Free (A) | ||||
| CIAT: N/A | CIAT: N/A | ||||
| CRT: Free | CRT: Free (A) | ||||
| IT: Free | IT: Free (A) | ||||
| NT: N/A | NT: N/A | ||||
| SLT: N/A | SLT: N/A | ||||
| JT: Free | JT: Free (A) | ||||
| PT: Free | PT: Free (A) | ||||
| COLT: Free | COLT: Free (A) | ||||
| PAT: Free | PAT: Free (A) | ||||
| HNT: Free | HNT: Free (A) | ||||
| KRT: Free | KRT: Free (A) | ||||
| CEUT: Free | CEUT: Free (A) | ||||
| UAT: Free | UAT: Free (A) | ||||
| CPTPT: 7% | CPTPT: Free (F) | ||||
| CPBNT: 13% | CPBNT: Free (X18) | ||||
| CPCLT: 13% | CPCLT: Free (X25) | ||||
| CPMYT: 13% | CPMYT: Free (X39) | ||||
| UKT: Free | UKT: Free (A) | ||||
| GPT: N/A | GPT: N/A | ||||
| LDCT: Free | LDCT: Free (A) | ||||
| CCCT: Free | CCCT: Free (A) | ||||
| AUT: N/A | AUT: N/A | ||||
| NZT: N/A | NZT: N/A | ||||
| 2404.11.90 | --Other tobacco | 9.5% | 9.5% (A) | UST: Free | UST: Free (A) |
| MXT: Free | MXT: Free (A) | ||||
| CT: Free | CT: Free (A) | ||||
| CIAT: N/A | CIAT: N/A | ||||
| CRT: Free | CRT: Free (A) | ||||
| IT: Free | IT: Free (A) | ||||
| NT: N/A | NT: N/A | ||||
| SLT: N/A | SLT: N/A | ||||
| JT: Free | JT: Free (A) | ||||
| PT: Free | PT: Free (A) | ||||
| COLT: Free | COLT: Free (A) | ||||
| PAT: Free | PAT: Free (A) | ||||
| HNT: Free | HNT: Free (A) | ||||
| KRT: Free | KRT: Free (A) | ||||
| CEUT: Free | CEUT: Free (A) | ||||
| UAT: Free | UAT: Free (A) | ||||
| CPTPT: 5% | CPTPT: Free (F) | ||||
| CPBNT: 9.5% | CPBNT: Free (X18) | ||||
| CPCLT: 9.5% | CPCLT: Free (X25) | ||||
| CPMYT: 9.5% | CPMYT: Free (X39) | ||||
| UKT: Free | UKT: Free (A) | ||||
| GPT: N/A | GPT: N/A | ||||
| LDCT: Free | LDCT: Free (A) | ||||
| CCCT: Free | CCCT: Free (A) | ||||
| AUT: N/A | AUT: N/A | ||||
| NZT: N/A | NZT: N/A | ||||
PART 2
| Tariff Item | Most-Favoured-Nation Tariff | Preferential Tariff |
|---|---|---|
| 2404.11.10 | Effective on January 1, 2023 CPTPT: 5.5% | |
| Effective on January 1, 2024 CPTPT: 4.5% | ||
| Effective on January 1, 2025 CPTPT: 3.5% | ||
| Effective on January 1, 2026 CPTPT: 2% | ||
| Effective on January 1, 2027 CPTPT: Free | ||
| 2404.11.90 | Effective on January 1, 2023 CPTPT: 4% | |
| Effective on January 1, 2024 CPTPT: 3% | ||
| Effective on January 1, 2025 CPTPT: 2.5% | ||
| Effective on January 1, 2026 CPTPT: Free |
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the orders.)
Issues
Canada updated the Schedule to the Customs Tariff to reflect the 2022 version of the Harmonized System (HS) through the Order Amending the Schedule to the Customs Tariff (Harmonized System, 2022) [the Order]. This Order came into effect on January 1, 2022. However, a newly created tariff item had inadvertently resulted in an increase in customs duty rate for electronically heated tobacco products (EHTPs). An amendment to the Order as well as a remission order are required to correct this customs duty rate and allow for the refunding of any overpaid customs duties paid by importers since January 1, 2022.
Background
The Schedule to the Customs Tariff sets out tariff items and related tariff treatments and provides the ability to make regulations and orders related to those tariff treatments. The Schedule to Canada’s Customs Tariff is based on an international system of classification of goods, known as the HS, which is updated by the World Customs Organization every five years to take into account changes in technology and trade patterns. Canada updated its Customs Tariff to the latest version of the HS (HS 2022) through the Order, which was registered on August 12, 2021, and came into effect on January 1, 2022. After the Order was approved, it was brought to the attention of the Government that a newly created tariff item, [Products intended for inhalation without combustion:] “Containing tobacco or reconstituted tobacco” (2404.11.00), resulted in an increase in the rate of duty for EHTPs, from 9.5% to 13% at the most-favoured-nation (MFN) tariff rate. The increased rate was unintended, as the Order was an update intended to be revenue-neutral. The Order Amending the Schedule to the Customs Tariff, 2022-2 (the Amending Order) amends the Schedule to the Customs Tariff by creating two new items for EHTPs to match pre-existing rates of customs duty.
In addition, the Electronic Heated Tobacco Products Remission Order (the Remission Order) is necessary to allow importers to claim a refund for the difference in rates of customs duty paid from January 1, 2022, until the coming into force of the Amending Order.
Objective
The Amending Order and the Remission Order are necessary to retain the intended tariff-neutral outcome of the updates under the Order.
Description
The Amending Order amends the Schedule to the Customs Tariff to restore the rate of customs duty for EHTPs from 13% to 9.5% at MFN rate. The Remission Order allows importers who paid the higher duty rate from January 1, 2022, until the date of entry into force of Amending Order to seek a refund for the difference in the rates of customs duty.
Regulatory development
Consultation
Amending the Order and providing remission for overpaid customs duties are non-discretionary, given the intended purpose of the Order to strictly implement HS 2022 nomenclature updates and remain tariff-neutral for importers. Moreover, the Canada Border Services Agency (CBSA) has confirmed that only one importer is affected by the tariff rate involving imports of EHTPs and that no other issues have been identified since the Order entered into force on January 1, 2022. On this basis, there would not have been any value added in prepublishing the Amending Order or the Remission Order.
Modern treaty obligations and Indigenous engagement and consultation
Following the completion of the assessment of modern treaty implications, no adverse impacts on potential or established Indigenous or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982, were identified in the Amending Order or the Remission Order.
Instrument choice
The Order was made pursuant to paragraph 14(1)(a) of the Customs Tariff. Consequently, the same authority is required to amend the Order. As for remitting overpaid customs duties for imports that paid the higher rate, the only authority available is an order made under the section 115 of the Customs Tariff.
Regulatory analysis
Benefits and costs
The Amending Order and the associated Remission Order are important to ensure rates of duty remain neutral.
The value of overpaid customs duties to the Government since the Order came into effect is expected to be minimal (approximately $25,000). The Remission Order will provide the CBSA with the authority necessary to process claims from importers for refunds of the overpayment of customs duties.
Minor administrative costs are anticipated for businesses that have already imported the subject products and wish to submit a claim to the CBSA in order to obtain refunds of customs duty paid. Costs are expected to be minimal, as importers would only make requests covering imports since January 1, 2022, and the required evidence to demonstrate eligibility for remission would be available in their existing documentation. Overall, the expected benefits from remission for implicated businesses are expected to exceed the administrative costs associated with claiming refunds.
Small business lens
The Amending Order corrects the HS 2022 updates to the Schedule to the Customs Tariff, while the Remission Order ensures importers who may have paid the higher rate of duty can claim refunds for any overpaid customs duties. Importers of products at issue have been determined to be large businesses; therefore, analysis under the small business lens concluded that this initiative will not impact Canadian small businesses.
One-for-one rule
The Order relates to tax or tax administration and is exempt from the requirement to offset administrative burden and regulatory titles under the one-for-one rule.
Regulatory cooperation and alignment
The Amending Order and associated Remission Order restore tariff rates to pre-existing levels and uphold Canada’s international commitments under the International Convention on the Harmonized Commodity Description and Coding System to the World Customs Organization.
Strategic environmental assessment
A preliminary scan shows that the Amending Order and the Remission Order would not have any environmental impacts.
Gender-based analysis plus
The Amending Order and the Remission Order are technical in nature and do not involve any changes in tariff policy. They will only affect a limited audience and are not expected to disproportionately affect any groups.
Rationale
Not proceeding with the Amending Order and the Remission Order could result in importers paying a higher rate of duty than they should.
The Amending Order allows the Government to uphold the intent of the Order and respect the authority of this Governor in Council decision pursuant to the Customs Tariff.
Implementation, compliance and enforcement, and service standards
The Amending Order and related Remission Order would be implemented by the CBSA, as the administrator of the Customs Tariff. The CBSA will notify clients of the new tariff lines through a Customs Notice and bulletins through their Technical Commercial Client Unit.
The Amending Order and the Remission Order will come into force on the day on which they are registered; remission of overpayment of customs duties will be effective for eligible transactions from January 1, 2022.
Contact
Yannick Mondy
Director
Trade and Tariff Policy
International Trade Policy Division
Department of Finance Canada
Ottawa, Ontario
K1A 0G5
Email: tariff-tarif@fin.gc.ca