Canadian surtax relief: Remission of surtaxes on certain goods from China

Introduction

As of October 1, 2024 Canada began to  impose a 100% surtax on all electric vehicles originating from China. As of October 22, 2024, Canada imposed a 25% surtax on imports of steel and aluminum goods originating in China. These measures have been imposed, “to protect Canada’s workers and investments in these sectors from China’s unfair trade policies and to prevent trade diversion resulting from recent actions taken by Canadian trading partners.”[1] The Canadian measures are aligned with similar US measures.

Surtax relief is available for some Canadian businesses. Eligible businesses may request remission retroactively to the date that the surtax was imposed. Remission of surtaxes allows eligible businesses to avoid the adverse impact of surtaxes and to make supply chain adjustments in specific and exceptional circumstances. The following is a brief outline of the remission application criteria and process.

Criteria for remission requests

Only Importers and Canadian businesses are eligible to request remission of the surtaxes. Submissions received before November 8, 2024, will be processed as a priority.  Submissions made after this date will be processed (but not as a priority). No remission of surtaxes will be granted on imported goods intended for resale in the same condition to the US.

Canada will consider requests for remission of surtaxes only in the following cases:

1. When goods used as inputs, or their substitutes, cannot be sourced domestically or reasonably from non-Chinese suppliers.
2. When there are pre-existing contracts (entered into before August 26, 2024) that require Canadian businesses to purchase Chinese inputs for a set period of time.
3. Other exceptional circumstances, assessed on a case-by-case basis, where significant harm to the Canadian economy could result if the remission is not granted.

Canada will determine the suitable duration of remission.  In most cases remission will be granted on a temporary basis to allow Canadian businesses the opportunity to adjust and find alternative sources for goods.

Submitting remission requests

The Department of Finance, Canada will assess all submitted remission requests in consultation with other relevant federal departments. These requests may also involve consultation with other interested parties, such as domestic producers. Recommendations will then be made to the Minister of Finance who has the authority to recommend remission to the Governor in Council. Remission is effective if and when an Order in Council is approved by the Governor in Council.

Any confidential information in remission requests must be clearly marked to ensure protection from disclosure. Remission requests and enquiries can be sent to: [email protected].

Template for remission requests

Companies must provide information using numbered headings when making a remission application:[2]

1. A brief outline of operations including details of the corporate structure, location (HQ and any other locations) of the business, and number of employees.
2. A detailed description of the relevant goods and the 8-digit tariff item or items under which they are classified. The 10-digit statistical level can be provided if applicable.
3. The volume and value, exclusive of surtaxes, of importations of the goods on an annual basis or for the period for which remission is requested. For goods that have not been imported, include the date when imports will commence and the name of the foreign producer/exporter. For goods that have been imported, include the customs documentation package and relevant invoices showing surtaxes paid.
4. Evidence demonstrating inability to source the product, or substitutes, from Canadian suppliers or reasonably from other non-Chinese suppliers, including any request for proposal notice or the names of companies canvassed and, if possible, copies of replies from these companies. Any additional relevant information on the company’s sourcing model should also be provided.
5. Documents and information substantiating contractual obligations or other factors prevent sourcing the product or substitutes from Canadian suppliers or reasonably from other non-Chinese suppliers.
6. Documents and Information showing the inability to source the product or substitutes from Canadian suppliers or reasonably from other non-Chinese suppliers is temporary or transitional and, if so, for what period.
7. If the goods are used in a manufacturing operation, the cost of manufacturing one unit of the imported goods, broken down into:

1. 1. Cost (exclusive of surtaxes) of goods on which remission of duties is sought;
   2. Cost (exclusive of surtaxes) of other imported articles (please list);
   3. Cost of Canadian materials (please list);
   4. Labour;
   5. Overhead; and,
   6. Administrative and selling expenses.

8. The unit selling price for the imported goods and information on the effect of the remission of surtaxes on its cost and price.
9. Information on the effect of remission on employment, volume of production, investment, or other relevant aspects of operations.
10. Names and locations of Canadian competitors, with information on how the remission may affect those companies. If available, provide information on whether those companies import similar goods or whether they obtain comparable or substitutable goods from Canadian or foreign production.
11. Detailed comments on the reasons for requesting remission of surtaxes, clearly outlining the exceptional circumstances that merit consideration of the application, and making reference to the factual information provided in the submission.
12. Consent to share non-confidential information with domestic producers to validate information (and any conditions attached to that consent).
13. Any supportive or corroborative information, such as letters of support, independent studies or market data.
14. Any other information that may be significant in illustrating why the remission is necessary.

Our team can help

The process of applying for remission can be an extraordinarily difficult undertaking for the uninitiated.  Our Global Trade and Customs Group has substantial remissions experience and can help increase the likelihood of obtaining surtax relief.  Please reach out to Daniel Kiselbach or another member of the team to learn more.

[1] Government of Canada, Notice of Intent to Impose Surtaxes on Chinese Steel and Aluminum in Response to Unfair Chinese Trade Practices, online: https://www.canada.ca/en/department-finance/programs/consultations/2024/notice-of-intent-to-impose-surtaxes-on-chinese-steel-and-aluminum-in-response-to-unfair-chinese-trade-practices.html.

[2]  Government of Canada, Process for Requesting Remission of Surtaxes That Apply on Certain Goods from China, online: https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/process-requesting-remission-surtaxes-that-apply-on-certain-goods-china.html.Taken from subheading “Template for Remission Requests”