As Canadian Customs Brokers, we’ve cleared some shipments through Canada Customs recently that brought to light what exactly bonded cargo is and what effect it can have on the taxes you pay on imported goods. Consider your return from a vacation outside of Canada. You disembark from the plane and are waiting in line along with the other passengers to go through Canada Customs. Technically you are in the country, however because you have not yet passed through Customs, you are in a bonded zone. This is a secure area where you are not permitted to leave until Canada Customs approves entry and allows you to proceed. This is the essence of bonded cargo.
What is Bonded Cargo?
Cargo that comes into Canada from outside an international border, but that hasn’t cleared Canadian Customs, is considered “bonded cargo”, or “in-bond”. Just like the above passenger example, the cargo is technically in Canada, however it is in a secured area until authorized for release into Canada by Canadian Customs. The term bonded means that the secured area, generally called a bonded area, has put a payment in place with Canadian Customs authorities and put certain parameters in place to meet the requirements to keep a bonded space.
Why Bond Cargo?
There are a variety of reasons cargo is bonded into Canada. Goods can be stored or undergo manufacturing operations all without the payment of duty (with the authorization of Canadian Customs). So for example, Company A can order goods in September and keep the them in a bonded warehouse until November without have to pay taxes on the goods, but still ensure the goods are here for the Christmas rush. When it comes time for them to take the goods, they can pay the taxes on the goods, have them released from the bonded area and take delivery of the shipment.
How can Bonded Cargo Affect the Taxes I Pay?
We encountered a situation with 2 shipments recently from Peru to Canada of preserved sweet peppers. One shipment cleared US Customs and came to Canada via truck and was cleared at the Canadian border. From Canada Customs perspective, these goods are from the US, but their country of origin is Peru. So because the goods did not ship directly from Peru to Canada, the importer was not able to benefit from the terms of the Canada-Peru Free Trade Agreement, and had to pay 8% duty on the shipment. The other shipment came to Canada from Peru and moved “in-bond” through the US. This means that although the freight traveled through the US, the freight did not clear US Customs and the goods came to Canada from Peru without leaving Custom control. This shipment fulfilled the requirements of the Canada-Peru Free Trade Agreement, and was imported without paying any duty.
How Can Orbit Brokers Help?
As Canadian Customs Brokers, we are trained to find ways to save you money. Whether it be by moving freight in bond through countries so that you can benefit from trade agreements, or keeping goods stored until you need them to be released, we can help. Feel free to contact us for a quote today and let us help you import your goods into Canada.