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What is a Free Trade Zone?

OVERVIEW/DESCRIPTION

A Free Trade Zone (FTZ) in Canada is a program offered by the Canada Border Services Agency (CBSA) that allows approved companies to bring shipments into Canada free of duty and most taxes providing those goods are later shipped out of Canada (exported). If the goods are not exported within 4 years the duty and taxes must be paid. While in Canada, the goods may be used in limited circumstances or undergo further manufacturing or processing.

Who Can Apply?

ELIGIBILITY
 Export Import

This program is for businesses who import goods into Canada or receive goods that were imported into Canada and later export those same goods from Canada.

Which Shipments Qualify?

CRITERIA/CONDITIONS

Imported goods that are intended for export from Canada, used for the following purposes while in Canada:

  • Display or demonstratation
  • For use in the manufacture of another product that will be subsequently exported
  • Goods unchanged (not used while in Canada)
  • Materials and parts, other than fuel or plant equipment, that are consumed or expended in the direct manufacture of goods that are for export from Canada
  • Some scrap and waste resulting from processing done in Canada may also be eligible

How Could I benefit from FTZ?

BENEFITS/ADVANTAGES
Reduce Customs Duty

Cost Savings - The FTZ program can help Canadian businesses by lowering costs, improving cash flow and ultimately increasing their bottom line. The program offers full relief of the following tariffs:

  • Customs duty
  • SIMA Anti-dumping and countervailing duties
  • Excise Taxes
  • GST/HST (reduced amount only)

Location Flexibility - Canada’s FTZ program offers unique flexibility proving to be advantageous for Canadian businesses. Unlike world-wide free trade zones, which are based on certain geographical regions, Canada does not place any restrictions on the location. Potentially, any company could be approved regardless of their physical location in Canada or alternatively they could choose a region which best suits their business needs to set-up a facility.

What are the Requirements?

RESTRICTIONS/LIMITATIONS
Export Requirements

Export Requirement - All imported goods must be exported from Canada within four years from the day it crosses the border into Canada, except for imported spirits used to manufacture distilled spirits which must be exported within 5 years.

Non-Qualifying Goods Reporting - When the goods no longer qualify for duty relief under this program (ie: goods were sold in Canada or no longer will be exported) they must be reported and duties paid within 90 days. Failure to do so will result in the assessment of a penalty and applicable fines and duty with interest payable.


NAFTA Restriction – When foreign goods are imported into Canada then exported to a NAFTA country (USA or MX) the entire amount of duty may not be eliminated under the FTZ program. The Canadian duty amount must be compared to the NAFTA country duty and the “lesser of the two duties” can be claimed for savings. Some exclusions apply. Ask us if this restriction applies to your shipments.

What are the Associated Risks?

IMPACT/RISKS/CONSIDERATIONS
tR

Trade Compliance – Instances of non-compliance with the requirements of the Duties Relief Program will result in a demand for payment of any outstanding duties owing and may result in the possible removal from the program and the assessment of a penalty under AMPS.

Sustainability – Approved FTZ locations must have adequate control records in place to track the imported goods while they remain in Canada. The records, including tracking of all receipts, activities and movement of the goods included under the program, must be sufficient to enable the CBSA to conduct an audit. The ongoing maintenance and tracking of shipments is critical for continued participation in the program.

Canada Customs

Exposure – Applicants will be scheduled for an initial visit from CBSA to confirm adequate control records exist as indicated in the company’s application. The company will also be subject to periodic audits or validations that will be conducted at their premises to monitor compliance and activity summaries.

How Borderflow Can Help

PROJECT CONSULTING SERVICES

Borderflow will seamlessly help you through the entire process of becoming FTZ approved including guiding you through the application process, providing on-site support for the visit from Customs and implementing an efficient maintenance program for ongoing compliance and adherence to the program requirements. Contact us to start your application today.