Customs Brokerage News

Keeping you Informed

New Harmonized Sales Tax (HST) as of July 1, 2010
How it will affect your brokerage services, freight and the importing of goods


Effective July 1, 2010, the provinces of British Columbia and Ontario will replace their provincial sales taxes with a single Harmonized Sales Tax (HST). The HST is already in effect in Nova Scotia, New Brunswick and Newfoundland (at a rate of 13%) since April 1, 1997. Effective July 1, 2010 HST will be applied to taxable goods and services at a rate of 12% in British Columbia, 13% in Ontario and 15% in Nova Scotia.

The HST is a value-added tax which combines the provincial sales tax (PST) of the five participating provinces (British Columbia, Ontario, New Brunswick, Nova Scotia, and Newfoundland) with the federal Goods and Services Tax (GST).

How Does HST Affect Commercial Imported Goods?
At time of importation, HST does not apply to Commercial Goods. The rules remain unchanged at the rate of 5% GST.

Note: Non-resident importers to Canada (if GST registered)
The HST can be accounted for through your input tax credits. If you are GST registered with the Canada Revenue Agency and you are a non-resident importer to Canada, you can claim an input tax credit to recover GST and HST on goods and services.
Should you require assistance with claiming GST, HST or your Input Tax Credit process, please contact us at consulting@dbschenker.com.

How Does HST Affect Non-commercial Imported Goods?
The rules regarding the importation of non-commercial goods have changed. In most cases, HST applies to taxable importations of Non-commercial goods imported by a resident of a participating province, regardless of the point of entry into Canada or where customs clearance occurred.

For example, if non-commercial goods are imported through any province, by a resident of Ontario (where the address of the consignee is Ontario), HST is collected. However, if a resident of Alberta (where the address of the consignee is Alberta) imports non-commercial goods through Ontario (or any HST participating province) only GST is payable.

The HST is calculated on the duty-paid value of the goods and is collected by CBSA (Canada Border Services Agency) at the time of importation.

How Does HST Affect Customs Brokerage Services?
Once it is determined that a supply of a customs brokerage service is made in Canada, specific place of supply rules for brokerage services must be considered in order to determine the province in which the supply of the service is made. Under the Place of Supply (GST/HST) Regulations, a “customs brokerage service” means a service of arranging for the release of imported goods or of fulfilling, in respect of the importation, any requirement under the Customs Act or the Customs Tariff to account for the goods, to report, to provide information or to remit any amount.

HST on brokerage services, as ruled by CRA (Canada Revenue Agency), is based upon the province where the goods entered Canada or where they were customs cleared. You will therefore be billed the HST on our brokerage service fee if your goods are imported through British Columbia, Ontario, New Brunswick, Nova Scotia or Newfoundland, regardless of the province of destination. HST does not apply to service fees if your goods are imported through any other province, even if your goods are destined for an HST participating province. For example, goods destined for Nova Scotia that are customs cleared in the province of Alberta only attract the 5% GST on brokerage services.

Note: Non-resident importers to Canada (if not GST registered)
Any non-resident importer to Canada who is not GST registered with the Canada Revenue Agency will continue to be exempt from HST on brokerage services.

Consulting & Post Entry Services
A service supplied in relation to an objection, appeal, re-determination, re-appraisal, review, refund, abatement, remission or drawback, or in relation to a request for any of the foregoing, however, is subject to the above general place of supply rules for services to determine the province in which the supply is made.

Brokerage services (province of Quebec)
QST (Quebec sales tax) on our customs clearance brokerage services is also based on the province of release. You will therefore be billed the QST on our service fee if your goods are imported through Quebec, regardless of the province of destination.

How Does HST Affect International Freight Movement Fees?
For international freight movements, into Canada or from Canada to foreign destinations, there is no GST or HST applied on the freight movement fees. Freight movement services fall under the list of GST zero-rated goods and services and therefore are non-taxable.

How Does HST Affect Domestic/Local Freight Movement Fees?
Most domestic freight is subject to HST if the destination of the goods is within any HST participating province and is subject to GST for destinations in the rest of Canada. For example, if your shipment originates in Ontario and is destined for delivery in Manitoba only GST is collected. However, if your shipment originates in Alberta and is destined for British Columbia (or any participating HST province) the HST will apply on the freight movement service fees.

What are the HST Transition Timeline?
HST would apply to brokerage service fees based on the release date of the imported goods. If goods are released on or after July 1, 2010 HST is applied on our brokerage fees.
On domestic shipments, where the freight started its journey before July 1, 2010 but delivery takes place on or after July 1, 2010 only GST is collected. If, however, the freight started its journey on or after July 1, 2010 the HST of the participating province will apply on freight movement fees.