Canada has created a new outward processing remission order for textile and apparel production and imports.The purpose of this new remission order is to enhance the competitiveness of Canadian textile and apparel producers by allowing duty to be remitted on inputs used in production occurring outside of Canada.
Canadian Customs Memorandum D8-2-6 outlines the conditions under which a remission may be granted under the Outward Processing Remission Order (Textiles and Apparels) ("the Order").The Order came into effect on May 1, 2008.It provides for the remission of a portion or all of the custom duties payable on imported apparel produced in certain countries comprised of textiles "produced in Canada"; the latter is a technical term and actually permits non-Canadian inputs and non-Canadian production to be subject to duty remission.
The remission is applied against the duties otherwise payable.The applicant for duty remission may claim the most beneficial tariff treatment available in calculating the duties otherwise payable.If the tariff classification has a General Preferential Tariff ("GPT") rate assigned, that rate may be the most beneficial available subject to qualification.However other (more) beneficial rates may also be available under other trade agreements or under the Customs Tariff itself.Goods qualifying for the least Developed Country Tariff would not need to be subject to the application of outprocessing duty remission – they are already duty free.As noted previously,the rules of origin for any preferential tariff treatment must be met if claimed.
The duty remission under the Order may be granted provided the following conditions are met:
1.The apparel must be produced in Canada and directly shipped (or transshipped under limited circumstances) to Canada from a country that is a beneficiary of the General Preferential Tariff ("GPT").
2.The apparel must be produced in whole or in part from textiles produced in Canada.Nonetheless, textile inputs "produced" in Canada may still contain imported materials, and remission can still be granted if two conditions are met:
i.The imported materials are sufficiently transformed in Canada to undergo a change in tariff classification at the 4, 6, or 8 digit level.The value for duty of the imported yarn or fabric must still make up less than 50% of the value for duty of the exported textiles produced in Canada; and
ii.The value of the duty of the imported materials (as determined by Customs Act Sections 48 and 53) is less than 50% of the value of the textiles produced in Canada.Imported fibers referred to in headings 50.01 to 50.03, 51.01 to 51.05, 52.01 to 52.03 and 53.01 to 53.05 are not considered as imported materials and their value is not included in calculating the percentage of imported materials that make up the value of the textiles produced in Canada.
The value for duty of other imported materials including dyes and bleach, used to make the textiles in Canada must also be included in calculating the percentage of imported materials that make up the value of the exported textiles produced in Canada.In cases where a Canadian supplier can only declare a "range" of Canadian value content, only the lower declared Canadian value content may be used.Applicants that are not the manufacturer or exporter of the textiles are responsible for providing the necessary documentation from the manufacturer or exporter of the textiles.
The Order only relieves customs duties payable under the Customs Tariff.It does not relieve surtaxes or temporary duties levied under the Customs Tariff or duties levied under SIMA or the GST / HST.The Order also cannot be used in conjunction with any other duties relief provision.
Jim Karahalios/Jesse I. Goldman
Bennett Jones LLP
3400 One First Canadian Place
P.O. Box 130
Toronto, OntarioM5X 1A4
Telephone: 416-777-6516 / 416-777-6442
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