As Canada continues to engage in an ongoing global trade war, it is important that you ensure your products are properly classified, both from a regulatory and a commercial perspective.

As an importer of foods or health-related products, there are certain steps you should take to safeguard your business.

First, be aware of any tariffs which may apply to the products that you import. A current list of recent tariffs imposed on U.S. products by the Canadian government is available on the Department of Finance’s website: https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/canadas-response-us-tariffs/complete-list-us-products-subject-to-counter-tariffs.html. You want to not only ensure you comply with the tariffs, but also that you factor these taxes into your cost-of-doing-business.

Second, make sure you identify the correct HS-Code for your product prior to shipping. This is a 6-digit code assigned to all products under the global Harmonized System (HS) classification system.

So, what is the big deal about HS-Codes? Here are just three reasons why getting the right HS-Code is so important:

• Failing to do so could result in you having to pay retroactive fees plus interest, having to pay monetary penalties, and/or having your shipment seized.
• Failing to do so could result in you unnecessarily paying tariffs on goods to which they do not apply.
• Failing to do so could result in enforcement at the border for non-compliance under a regulatory scheme that does not even apply to your product.

To illustrate this third bullet, consider the following scenario, which I have seen played out numerous times:  A Canadian company legally imports a Natural Health Product (NHP) from the U.S. under their Site Licence. In Canada, NHPs are classified as drugs at the level of the Food and Drugs Act. However, in the U.S. such products are often fall under the category of Dietary Supplement, which are a sub-category of food south of the border.

So, what often happens?  The customs broker in the U.S. will assign a food-related HS-Code, instead of a correct drug (or Medicaments) HS-Code for Canada. The shipment then shows up at the border where it is stopped by the Canada Border Services Agency because the hapless importer does not have the required Safe Food for Canadians Licence to import foods. Not only that, but even if the shipment does go through as-is the importer could end up paying duties or tariffs on food products that do not apply to NHPs.

All of this could have been avoided had the broker simply applied the correct HS-Code to the shipment from the beginning.

The take home message here is to always ensure you properly classify the products you are importing (whether drug, NHP, food, cosmetic, medical device) because how they are classified in Canada can differ from other countries. Next make ensure you have all the required licences, where applicable, for importing and selling your products in Canada. Finally, make sure that the proper HS-Code is applied to any shipments coming into the country.

While dicentra does not consult directly in the area of customs and excise, we do provide to industry our expertise when it comes to proper product categorization and classification, as well as with obtaining the legally required licenced under the Food and Drugs Act and related Regulations. Should you require assistance in these areas we would be more than happy to offer our services.