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Old 13-06-2016, 01:56   #1
Jd1
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Minimizing Canadian Import Duty

This is more of a theoretical question but I would like to explore the subject if I may ....

Given: I am a Canadian, living in Canada. A boat not manufactured in North America under NAFTA is subject to a 9.5% import duty when imported to Canada (as well as PST and GST (or equivalent HST))

Let's say I wanted to purchase a brand new boat. The boat hull is produced in a non NAFTA country but all the bits and pieces that go into the boat were produced in the USA and were shipped to the boat builder to attach to the hull that the builder produced. This would be all the rigging, the engine, the sails the plumbing, the fixtures, basically anything besides the hull and the woodwork.

Has anyone ever looked into the possibility of buying a boat but having the invoice list the hull separate from all the other bits and pieces so if you were buying a 400k boat for example you would have a 100k hull and 300k worth of NAFTA produced bits listed separately on the invoice ( a saving of roughly 30k).

Has anyone ever gone through this? Did you save the import duty on the NAFTA manufactured components? Was the boat broker ok with listing all bits separately on the invoice? Did you need a specialist in import duty to process this transaction or was the itemized invoice sufficient to import the boat? What did you learn? What would you do different?

Edit: What if the majority of the cost comes from NAFTA built components - could the boat somehow qualify as US built and avoid import duty completely ? If I was to import a bunch of bits and pieces, put them together and sell the resulting product, I could call it "made in Canada" if a certain percentage of cost is Canadian based - could something like that be used to call a chinese boat as US built (if 75% or whatever of it was US produced)
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Old 13-06-2016, 02:00   #2
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Re: Minimizing Canadian Import Duty

A boat that was say built in Europe is going to be full of components made in Europe (or China). Were is the saving?

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Old 13-06-2016, 02:13   #3
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Re: Minimizing Canadian Import Duty

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Originally Posted by Pete7 View Post
A boat that was say built in Europe is going to be full of components made in Europe (or China). Were is the saving?

Pete
Let's say the hull was built in China for argument sake. The spars might be Charleston, the winches might be Lewmar, and so on. You would not want to outfit a high end boat with Chinese made bits and pieces but would send a container of components to the boat yard to install onto the hull. Heck, even the fiberglass and epoxy (or whatever) might come from the US and only the labour is done in China.
.... at least that is what I am basing the question on.
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Old 13-06-2016, 05:57   #4
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Re: Minimizing Canadian Import Duty

Quote:
Originally Posted by Jd1 View Post
This is more of a theoretical question but I would like to explore the subject if I may ....

Given: I am a Canadian, living in Canada. A boat not manufactured in North America under NAFTA is subject to a 9.5% import duty when imported to Canada (as well as PST and GST (or equivalent HST))

Let's say I wanted to purchase a brand new boat. The boat hull is produced in a non NAFTA country but all the bits and pieces that go into the boat were produced in the USA and were shipped to the boat builder to attach to the hull that the builder produced. This would be all the rigging, the engine, the sails the plumbing, the fixtures, basically anything besides the hull and the woodwork.

Has anyone ever looked into the possibility of buying a boat but having the invoice list the hull separate from all the other bits and pieces so if you were buying a 400k boat for example you would have a 100k hull and 300k worth of NAFTA produced bits listed separately on the invoice ( a saving of roughly 30k).

Has anyone ever gone through this? Did you save the import duty on the NAFTA manufactured components? Was the boat broker ok with listing all bits separately on the invoice? Did you need a specialist in import duty to process this transaction or was the itemized invoice sufficient to import the boat? What did you learn? What would you do different?

Edit: What if the majority of the cost comes from NAFTA built components - could the boat somehow qualify as US built and avoid import duty completely ? If I was to import a bunch of bits and pieces, put them together and sell the resulting product, I could call it "made in Canada" if a certain percentage of cost is Canadian based - could something like that be used to call a chinese boat as US built (if 75% or whatever of it was US produced)
The answer will depend on where was the boat put together. Have a look at the handbook for the Canadian Generalized System of Preferences or talk to a knowledgeable customs broker. First you need to determine if there is a preferential duty rate for boats (HS code whatever) "made" in that country. That may solve your problem. Then look at clauses (like in the US scheme) that let you exclude NAFTA-made content.

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Old 13-06-2016, 06:17   #5
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Re: Minimizing Canadian Import Duty

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Originally Posted by Jd1 View Post
Let's say I wanted to purchase a brand new boat.
...which means you're a wealthy Canadian one-percenter. Who else can buy new? Pay the damn duty already.

Seriously though... the customs people aren't complete idiots. What's crossing into Canada is a boat, not a container of parts, they will make a determination of the country of origin, and from that the duty if any. They've seen most of these tricks already.

We're talking 10% here, and you could probably make up that 10% or more with less hassle and risk, by searching globally for an instock or a slightly used boat that meets your spec, doing some hard bargaining, getting a discount for end-of year or low-season order, boat-show order, offering some cash up front, taking advantage of currency swings, etc etc.
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Old 13-06-2016, 11:45   #6
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Re: Minimizing Canadian Import Duty

Suggest you don't try anything funny unless you want to end up like the guy in this story:

Yacht story leads to $212K in fines

As you can see, there's case history.
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Old 13-06-2016, 12:16   #7
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Re: Minimizing Canadian Import Duty

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Originally Posted by techmans View Post
Suggest you don't try anything funny unless you want to end up like the guy in this story:

Yacht story leads to $212K in fines

As you can see, there's case history.

Ooooooops
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Old 13-06-2016, 13:49   #8
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Re: Minimizing Canadian Import Duty

These things are generally cut and dried. Canada Revenue Agency or Canada Customs merely make an assertion that things stand thus or so and assess you on that basis. Then the onus shift to YOU to prove that CRA or CC are wrong. Few can afford the costs of doing that. Best to lay you budget so you can stick to the rules :-)

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Old 13-06-2016, 14:11   #9
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Re: Minimizing Canadian Import Duty

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Originally Posted by Lake-Effect View Post
the customs people...will make a determination of the country of origin, and from that the duty
I took Taxation a very long time ago, but one thing the professor said has stuck with me: Any time you encounter a tax problem to which you don't know the answer, select the option that maximizes government revenue. You will be right far more often than not.

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Old 13-06-2016, 15:52   #10
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Re: Minimizing Canadian Import Duty

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Originally Posted by Paul J. Nolan View Post
I took Taxation a very long time ago, but one thing the professor said has stuck with me: Any time you encounter a tax problem to which you don't know the answer, select the option that maximizes government revenue. You will be right far more often than not.

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Hi Paul ! I'm a Canadian citizen who purchased in July 2014 a fresh water Ericson 34 in the US (Manistee, lake Michigan). So far, I've never entered Canadian waters: I've sailed it from Lake Michigan to the West Indies, but I plan to sail it via the Panama Canal, Marquesas, Tuamotus, Tahiti, Hawaii & Vancouver** where I'll enter Canada for the first time... Question: What import duty rate should I expect to be charged since my Ericson was built in 1988 in one of the NAFTA countries ? Thanks for your help

**I've done the same trip in a C&N 31 in a previous life (1980)
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Old 13-06-2016, 16:02   #11
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Re: Minimizing Canadian Import Duty

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Originally Posted by ALAIN97133 View Post
Hi Paul ! I'm a Canadian citizen who purchased in July 2014 a fresh water Ericson 34 in the US (Manistee, lake Michigan). So far, I've never entered Canadian waters: I've sailed it from Lake Michigan to the West Indies, but I plan to sail it via the Panama Canal, Marquesas, Tuamotus, Tahiti, Hawaii & Vancouver** where I'll enter Canada for the first time... Question: What import duty rate should I expect to be charged since my Ericson was built in 1988 in one of the NAFTA countries ? Thanks for your help

**I've done the same trip in a C&N 31 in a previous life (1980)
If you can provide a "NAFTA Certificate of Origin" issued by the manufacturer then you are safe from Canadian import duty.

I donīt know how flexible are the Canadian authorities when you show the a Certificate of Origin that is signed by anyone other than the manufacturer. I know that in the US they are quite flexible if you can prove that the thing was actually made in NAFTA territory. Many other countries are not flexible at all in that sort of thing.
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Old 13-06-2016, 16:09   #12
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Re: Minimizing Canadian Import Duty

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Originally Posted by ALAIN97133 View Post
Hi Paul ! I'm a Canadian citizen who purchased in July 2014 a fresh water Ericson 34 in the US (Manistee, lake Michigan). So far, I've never entered Canadian waters: I've sailed it from Lake Michigan to the West Indies, but I plan to sail it via the Panama Canal, Marquesas, Tuamotus, Tahiti, Hawaii & Vancouver** where I'll enter Canada for the first time... Question: What import duty rate should I expect to be charged since my Ericson was built in 1988 in one of the NAFTA countries ?
If you want real advice ask a customs broker but AFAIK if it's built in a NAFTA jurisdiction the duty is 0. GST and PST are still payable. However, unless you are in an HST province, it will take your provincial tax guys a while before they get around to sending you a bill. HST on the other hand will be payable at the border.


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Old 13-06-2016, 16:51   #13
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Re: Minimizing Canadian Import Duty

????????????????? I just imported my US manufactured vessel did not pay any import duty just HST as I live in Scare-Ontario yours to recover.
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Old 13-06-2016, 16:57   #14
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Re: Minimizing Canadian Import Duty

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????????????????? I just imported my US manufactured vessel did not pay any import duty just HST as I live in Scare-Ontario yours to recover.
The boat you imported was a NAFTA boat and not subject to duty
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Old 13-06-2016, 16:59   #15
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Re: Minimizing Canadian Import Duty

Well it was an interesting question but it would appear that the whole thing is a non-starter ....

Thanks for all the replies !
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