On July 11, 2016, the Canada Border Services Agency (“CBSA”) announced their audit priorities for the second half of 2016. One of the priorities for tariff classification verifications is “parts of lamps”. Parts of lamps were first announced as a verification priority in 2015. The CBSA takes the position that parts of lamps are classified in HS Code Heading 94.05. This issue is relevant because the MFN rate of duty under the Customs Tariff for lamps and accessories is generally between 5-7%. Certain other H.S. Codes used by importers have duty free rates.
The CBSA gets support from recent Canadian International Trade Tribunal (“CITT”) cases such as
- Liteline Corporation v. The Canada Border Services Agency, AP-2014-029 (February 1, 2016);
- Costco Wholesale Ltd. v The Canada Border Services Agency, AP-2012-041, AP-2012-042 (July 29, 2013); and
- Ulextra Inc. v. President of the Canada Border Services Agency, AP-2010-024 (June 25, 2011).
In Liteline, the CITT stated when finding the LED lights were lamps and the appropriate HS tariff classification to be heading 94.05:
“These classification opinions support the Tribunal’s view that heading No. 85.43 is appropriate for the classification of certain lamp components, be they based on LED technology or otherwise. The goods described in the classification opinions are components of lamps and lighting fittings, i.e. they are light bulbs. However, the goods in issue are the lamps themselves and, as such, are not described by the classification opinions. The classification opinions deal with LED bulbs (classified in heading No. 85.43, just as filament bulbs would be classified in heading No. 85.39) and do not deal with complete fixtures and lamps such as the goods in issue which belong specifically in heading No. 94.05.”
“It was uncontested that the goods in issue emit light and are used for the illumination of rooms. As such, they are properly considered to be lamps or lighting fittings.”
In Ulextra, the CITT stated in respect of certain ceiling-mounted recessed lighting fittings when finding the appropriate HS tariff classification was heading 94.05:
“The Tribunal is of the view that, even if the goods in issue were to be considered incomplete articles, that is, incomplete lighting fittings or fixtures as presented at importation, they would retain the essential character of complete lighting fittings of heading No. 94.05 and would remain classified as such by application of Rule 2 (a) of the General Rules. Indeed, the purpose of the goods in issue is to produce light for room illumination, and, at the time of importation, the goods in issue comprise the two essential components that are necessary for them to perform this function, namely, the lamp-holder/socket and the junction box.
The Tribunal notes that Ulextra agrees that these two components are indispensable to enable light to be produced. Moreover, the Tribunal accepts the CBSA’s argument that, as imported, the goods in issue have all the essential characteristics of lighting fittings, particularly in view of the fact that they could function without the presence of a trim and that bulbs are generally not included when one purchases a lighting fitting or a lamp. In sum, having carefully examined the evidence, the Tribunal is of the view that the goods in issue can be viewed as having the “essential character” of complete lighting fittings because they are recognizable or identifiable as lighting fittings.
The Tribunal therefore finds that the goods in issue are lighting fittings or, at a minimum, incomplete lighting fittings that have the essential character of complete or finished lighting fittings. As such, they are properly classified in heading No. 94.05 and, in particular, applying Rule 6 of the General Rules and Rule 1 of the Canadian Rules, under tariff item No. 9405.10.00 as other electric ceiling or wall lighting fittings.”
It is important to know about these cases and the CBSA’s position. Many importers are facing large assessments. Anyone importing LED lights using an HS Code other than 94.05 should ask whether they are at risk of being a CBSA target. the answer is likely to be “yes”. If you make a voluntary disclsoure before you are contacted by the CBSA, you may avoid AMPs penalties. You will have to pay an assessment.