The Canadian International Trade Tribunal (the “Tribunal”) recently held in ContainerWest Manufacturing Ltd v. President of the Canada Border Services Agency, AP-2014-025 (July 27, 2015) that “a through bill of lading is required for entitlement to the GPT.” This decision may surprise many importers, customs lawyers and customs brokers.
GPT means General Preferential Tariff. Often GPT tariff rates are lower than Most-Favoured-Nation (MFN) tariff rates. Goods from developing countries and least developed countries may be entitled to enter Canada at the GPT rate provided certain conditions are satisfied. Goods imported into Canada from China prior to January 2015 were entitled to GPT tariff treatment. As of January 2015, number of countries became ineligible for the GPT , including Brazil, China, India, Russia and nearly 70 other countries. As of January 1, 2015, these countries will instead fall under the MFN status and will be subject to the higher MFN duty rate.
One of the preconditions to claiming GPT tariff treatment is that the goods imported into Canada must be shipped by way of “direct shipment”. Subsection 4(1) of the General Preferential Tariff and Least Developed Country Tariff Rules of Origin Regulations states that:
“Goods are entitled to the General Preferential Tariff only if they are shipped directly to Canada, with or without transhipment, from a beneficiary country.”
This is where is issue arises.
Subsection 17(1) of the Customs Tariff states that:
“For the purposes of this Act, goods are shipped directly to Canada from another country when the goods are conveyed to Canada from that other country on a through bill of lading to a consignee in Canada.” (Emphasis added)
The Tribunal held that the subsection 17(1) of the Customs Tariff “read in context and in its ordinary sense requires a through bill of lading as a condition of direct shipment for the purposes of the Customs Tariff”.
This decision may create difficulties for importers who have used or are using a form of documentation other than a through bill of lading. If an importer does not have a through bill of lading and the applicable MFN tariff rate is higher than the applicable GPT tariff rate, the importer may face a significant assessment. Therefore, for shipments to Canada, the form of the documentation is very important.
A through bill of lading is defined at www.investopedia.com as “a bill of lading that allows the transportation of goods both within domestic borders and through international shipment.” In other words, a through bill of lading covers the shipment of the goods from its origin (e.g., China) all the way through to its destination (e.g., Toronto) including any inland shipment that may be required.
While the impact of the ContainWest decision is diminished by the January 2015 changes to the GPT list of countries, importers from former GPT countries may face assessments going back 4 years or more. On a going forward basis, importers from current GPT countries should be mindful of the through bill of lading requirement.