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How to Avoid Customs Charges From USA to Canada (2024)

Published: May 31, 2024
Author: Aman Chopra

Are you shipping something exciting from the US to Canada? There’s one question to answer before you hit that “checkout” button. How to avoid customs charges from USA to Canada? Can we avoid paying these hefty fees?

This guide will help you learn ways to reduce expensive cross-border shipping charges. We’ll discuss the following topics:

  • Duty-free thresholds

  • Free trade agreements

  • Smart shipping strategies

Buckle up and get ready to understand the world of customs like a pro!

Key Takeaways

  • The Canadian government imposes customs duties and taxes for several reasons. One of the primary purposes is to provide funds for projects and services.

  • Canadians should know about duties and sales taxes: GST, PST, and HST. Understanding these fees and their applicable thresholds is crucial when importing goods.

  • While you cannot absolutely avoid paying customs charges from the US to Canada, you can reduce them when importing goods. These strategies include declaring accurate values and planning shipment values.

Why Do Customs Duties and Taxes Exist?

Canadian buildings and flag overview

There are a few reasons why customs duties and taxes exist:

1. Government Revenue. These charges are major sources of income for governments. They apply to goods entering the country, generating steady funds to support government programs and infrastructure.

2. Protecting Domestic Industries. Duties and taxes protect locally produced items. The taxes placed on imported goods make them more expensive than domestic products. Therefore, it encourages consumers to buy items within the country. As a result, this can help create jobs and stimulate the domestic economy.

3. Fair Trade and Negotiation. The government can use customs duties as a bargain in trade negotiations between countries. They can threaten to raise duties on imports from a particular country. In return, a government can pressure that country to lower its own duties on their exports.

4. Discouraging Illegal Activity. Certain duties can discourage the import of specific goods, such as agricultural products that might carry pests or diseases. High duties on illegal goods like drugs or weapons make them less profitable to smuggle.

5. Monitoring and Regulation. Customs duties can be a way to track the flow of goods across borders. Since each item category has an equivalent customs duty amount, customs authorities can use this information for various purposes. These reasons include collecting trade statistics or identifying potential security threats.

What Are The Different Customs Charges Canadian Consumers Should Know?

Wooden block with G-S-T initials per block

Canadian consumers ordering goods from the US might encounter different types of customs fees:

Duty

This is a tax levied by the Canadian government on certain imported goods. The amount of duty depends on the type of good, country of origin, and value. You can find the specific duty rate for an item using the Harmonized System (HS) Tariff Code.

The HS code classifies goods into particular categories, each with its duty rate. You can search for HS codes using the Canada Tariff Finder.

Sales Tax

There are two types of sales tax applied to imported goods in Canada:

Goods and Services Tax

Goods and Services Tax (GST) is a type of tax that you pay when you buy things or use services. It’s a fee added to the cost of items you purchase, like clothes, electronics, or even meals at a restaurant. The money collected from GST goes to the government, which pays for government projects.

Think of it as a small part of your spending that helps keep the country running smoothly. So, when you buy something and see a bit extra cost, the GST helps support your community.

Provincial Sales Tax

Provincial Sales Tax (PST) is a tax you pay when buying things in specific provinces or states. A small percentage of the price is added as PST when shopping for clothes, electronics, or other goods. These sales taxes go to the local government to help fund local projects everyone in the province uses.

  • Provinces with PST: Manitoba, Saskatchewan, and British Columbia have their own PST rates that apply on top of the GST.

Harmonized Sales Tax

Harmonized Sales Tax (HST) combines two types of taxes: the federal GST and PST. Some places in Canada use HST instead of having separate GST and PST, which makes it simpler. When you buy things, HST is added to the price, usually a percentage of the total cost. Like GST, the government collects this money to fund public projects and services.

  • Provinces with HST: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island have an HST that combines the GST with their provincial sales tax rate.

Understanding Duty-Free Thresholds

Duty-free thresholds refer to the highest amount of goods you can bring into a country without paying customs duties and taxes. These thresholds vary based on the type of shipment and sometimes the country of origin. The shipment types can be low-value or shipped through a courier or a postal service.

Here are the duty-free thresholds for Canada and their variations:

DescriptionThreshold (CAD)Details
General Duty-Free Threshold$20For most goods imported into Canada, duty and tax are applied to shipments over this value. It applies to both courier and postal services.
Personal Exemption (Canadian Residents)VariesDepending on the time spent outside Canada, residents may be entitled to a personal exemption when returning to Canada. Examples: after 24 hours – $200; after 48 hours – $800.
Courier Threshold for Trade Agreements$150For goods imported from certain countries with which Canada has trade agreements, such as the United States and Mexico, no duties are applied for shipments up to this value. However, provincial sales tax (PST) or Goods and Services Tax (GST) may still be applied.
Postal Service Threshold for Trade Agreements$40For goods imported through postal services from certain countries with which Canada has trade agreements, duty and tax apply for shipments over this value. This is notably lower than the courier threshold, leading to different handling for postal shipments.
  • Personal Exemption. Canadian residents returning from travel abroad may bring goods within certain limits without paying duties or taxes.

  • Trade Agreements. Any free trade agreement influences the thresholds for courier and postal services. This includes the Canada-United States-Mexico Agreement (CUSMA).

  • GST and PST. Even when a shipment is duty-free, goods are still subject to GST and PST.

  • Changes in Thresholds. Thresholds can change based on legislation, free trade agreements, and governmental policies. Thus, always check the most current regulations for specific imports.

Strategies to Reduce Customs Charges

A pie chart on the left and a notebook on the right with text "Free Trade Agreement"

Here are some strategies you, as a Canadian consumer, can use to reduce customs fees on your shipments from the USA:

Declare Accurate Value

Declaring the accurate value of goods when importing is crucial because it ensures fairness and legality. If you understate the value, it might seem like you’re saving money by avoiding taxes or duties. But, in reality, it can lead you to serious problems.

Canadian customs authorities check imports carefully. You could face fines, penalties, or even legal trouble if they find you misreported the value. Accurate declaration ensures that you pay the correct duty fees. It also keeps trade fair, preventing companies that cheat from having an unfair advantage. So, honesty is key for everyone.

Plan Shipment Value

Planning the shipment value means thinking ahead about the cost of goods you want to import, including shipping and insurance. If the shipment’s value is above a certain limit, you’ll need to pay these import fees, which can be costly.

By planning, you can choose the best shipping method and time. You can also split items into separate shipments to stay under the limit. This way, you can avoid unexpected fees, save money, and make shipping more efficient.

Leverage Free Trade Agreements (FTA)

CUSMA is a trade deal that makes it easier for Canada, the US, and Mexico to trade with each other. You can use this agreement’s rules to save money when importing goods. If the products you’re shipping are made in Canada, the US, or Mexico, you might not have to pay as many customs duties or taxes.

This can make goods cheaper, which is good for businesses and customers. By understanding how it works, you can make smarter choices. In return, you can save money and encourage more business among these countries.

Consider Duty Drawback Programs

In specific situations, duty drawback programs can offer partial refunds of duties paid on goods. This applies to goods that are subsequently exported from Canada. However, there’s a catch. These programs typically apply to commercial imports. In other words, it’s only beneficial to Canadian businesses to import items from the US; therefore, it might not be practical for everyday consumer purchases.

Self-Clear Your Package in Canada Border Services Agency (Optional)

You can save on brokerage fees. Courier services often add brokerage fees to handle customs clearance. You can potentially save on these fees by self-clearing your package through the Canada Border Services Agency (CBSA).

However, this option requires some effort and familiarity with customs procedures. Additionally, it can cause you stress and other issues during the process. So, weigh the potential cost savings against the time commitment and other perks.

What Happens If You Don’t Pay the Customs Charges

Small boxes, forklift, and no sign in an easel

Here’s what can happen if you don’t pay the customs charges on your shipment from the USA to Canada:

Package Held and Delivery Delayed

The biggest consequence is that the CBSA will hold your package until you settle the charges. Unfortunately, it can lead to significant delays in receiving your item.

Potential Return to Sender

In some cases, if the charges remain unpaid for an extended period, CBSA might return the package to the sender in the US. Depending on the seller’s return policy, this could leave you without your purchase and potentially out the item’s original cost.

Risk of Additional Fees

There’s something you need to watch out for apart from the outstanding customs charges. You might also incur storage fees for the time CBSA holds your package.

Impact on Future Shipments

Repeatedly neglecting to pay customs charges could flag you with CBSA. This leads to closer scrutiny of your future shipments, potentially causing further delays.

No Avoiding Charges Eventually

It’s important to remember that you’re legally obligated to pay the customs charges assessed on your import. Even if Canadian customs return your package to the sender, you are still responsible for the charges if the seller pursues them.

Recommendation

To avoid these hassles and potential costs, it’s best to factor in potential customs charges when budgeting for your purchase. Utilize the strategies outlined previously to minimize these charges. If you’re unsure about the possible fees, contact CBSA directly for guidance using their website or Border Information Line at 1-800-461-9999.

How Can Shippsy Help

Shippsy cannot help you avoid customs charges as they fully comply with CBSA regulations. However, they can help you in other ways when shopping online from the USA to Canada.

Consolidated Shipments (Minimizing Duty Threshold Issues)

If you’re planning on making multiple purchases from the US, consider package consolidation. This can push you over the duty-free threshold. Once they arrive at Shippsy’s US facility, you can request to have the packages delivered altogether. This can help keep the total declared value under the threshold.

Note: Shippsy only offers this option to packages from the same seller. Also, you can get a 25% discount off the handling fee* if you request 3+ packages on the same day. Contact us today for more information.

*This feature only applies to shipments to Ontario.

However, it’s important to consider a few caveats:

  • Consolidation Not Guaranteed. While Shippsy offers consolidation, it might not always be possible depending on your packages’ size, weight, or contents.

  • Duty Still Applies on Total Value. Even with consolidation, if the combined value of your items exceeds CAD 150, you’ll still be subject to a duty on the entire shipment amount.

Here’s how Shippsy can further assist you:

  • Transparent Duty and Tax Information. Shippsy’s platform might provide estimated duty and tax information during checkout. This can help you make informed decisions about your purchases and plan your spending accordingly.

  • Simplified Customs Clearance. Depending on their services and your location, Shippsy might offer some assistance with customs clearance procedures. However, it’s important to clarify this directly with Shippsy to understand the extent of their support.

Overall, while Shippsy can’t eliminate customs charges entirely, their consolidation service and potential for duty estimates can be helpful tools in your strategy to minimize these costs.

To Summarize

Avoiding customs charges can lead to unintentional non-compliance if rules are misunderstood or misapplied. Misdeclaring goods to avoid customs charges is illegal, leading to fines, penalties, or seizure of goods.

Remember, it’s always your responsibility to declare your items accurately and pay applicable customs charges.

To avoid stress when shopping from the US, you can choose to ship to Canada with Shippsy. They can help calculate your customs duties, process the customs clearance, and ship the items to Canada.


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