The Canada Border Services Agency collects a total of $30 billion in duties and taxes at the border. Of that, as much as $23 billion could be claimed for drawback, in other words, refunded to companies operating in Canada.
But it seems that eligible companies are not making use of duty relief programs in Canada. Around 290,000 companies operating north of the border either import and/or export, and yet only 1,650—less than six percent—make use of incentives that could reduce these tax and duty liabilities.
That’s why the Canadian government started the Free Trade Zone (FTZ) Point program. The point of the Point, so to speak, is to provide resources to grow awareness of duty relief programs among Canadian businesses and to provide a one-stop shop for companies to interact with the seven or so government agencies that provide the duty incentives.
There are eight such FTZ Points in Canada—at Calgary, Winnipeg, Niagara, Regina, Edmonton, Halifax, and Cape Breton—with the eighth Point, at Windsor-Essex, across the river from Detroit, having been designated in July.
“Companies are leaving a lot of money on the table,” said Rakesh Naidu, chief operating officer of the Windsor-Essex Economic Development Corporation, the operator of the newest Point. “Once they start using these programs they can start improving their cash flow and becoming more competitive.”
The Windsor-Essex Point also facilitates incentive programs sponsored by provincial and local governments. “The Point includes both an FTZ and access to all the programs available in the region,” noted Naidu.
Among the Canadian government programs administered at the Point, the Duties Relief Program allows companies to import goods, and manufacture or use the goods on a limited basis, without paying duties, as long as those goods are eventually exported. Drawbacks, or the refund of customs duties paid for imported goods, are available if goods are eventually exported. Companies participating in the Customs Bonded Warehouse Program may qualify for a complete deferral of duty and taxes. In that case the importer pays duty and taxes only on the portion of goods entering the Canadian market.
The Exporters of Processing Services Program enables qualified companies to import goods belonging to non-residents without paying the Goods and Services Tax/Harmonized Sales Tax (GST/HST), provided that these goods are imported for processing, distribution or storage, and are subsequently exported.
Canada also offers a Customs sufferance warehouse for goods that are brought in for an intermediate duration. They can be housed there for 40 days without duty, during which time they can be repackaged or otherwise manipulated. If they are not yet ready for re-export, they can be transferred to a customs bonded warehouse for up to four years without incurring any duties.
The Windsor–Essex Region is located within an eight-hour drive of over half of the North American population. Given its proximity to Detroit, it will undoubtedly benefit companies in automotive supply chains. Naidu believes that automation, food processing, and construction companies will also be major users of the FTZ Point.
The Windsor-Detroit crossing is the busiest commercial gateway on the US-Canada border, noted Naidu. Twenty-five percent of US-Canada trade crosses there, including 18,500 trucks annually, representing 30 percent of the truck total. “One-hundred billion dollars in trade passes through this region,” he said. “This is an important trading point for Canadian and US businesses alike.”
The Windsor-Detroit crossing is the busiest commercial gateway on the US-Canada border, noted Naidu. Twenty-five percent of US-Canada trade crosses there, including 18,500 trucks annually, representing 30% of the truck total.
“One-hundred billion dollars in trade passes through this region,” he said. “This is an important trading point for Canadian and US businesses alike.”