Deferring duties through the Customs Bonded Warehouse Program

Unlike Duty Drawback, which helps recover duties after they are paid, the Customs Bonded Warehouse Program helps delay duty payment while goods remain under customs control.

The Customs Bonded Warehouse Program can help you manage imports that arrive in Canada before they are ready for sale, distribution, or export.

Under the program, you do not pay duties and taxes until the goods are released for use or sale in Canada. If the goods are exported instead, duties and taxes may not be payable, provided the goods and warehouse activity meet the program requirements.

In this article, we explain how the Customs Bonded Warehouse Program works, when it may be useful, and what you should review before using the program.

What is the Customs Bonded Warehouse Program?

The Customs Bonded Warehouse Program is one of three components of the Duty Deferral Program offered by the Canada Border Services Agency (CBSA), along with the Duties Relief Program and the Duty Drawback Program.

Each manages duty costs at a different point in the import process. The Duties Relief Program may allow you to import eligible goods without paying duties upfront when the goods are intended for export. The Duty Drawback Program may allow you to recover duties already paid when the goods are later exported or used in a qualifying way.

The Customs Bonded Warehouse Program works differently.

It allows eligible imported goods to be stored in a CBSA-licensed customs bonded warehouse (CBW) in Canada while applicable duties and taxes are deferred. This can include customs duties, SIMA duties, excise duties, GST, and HST, depending on the goods.

The goods remain under CBSA control, and these charges generally become payable only when the goods are removed from the warehouse for use or sale in Canada.

While goods are in the warehouse, they cannot be further manufactured. Only specific activities are allowed, such as repackaging, marking, inspecting, or cleaning, provided they do not change the goods' essential nature.

When a bonded warehouse may be useful

A customs bonded warehouse may be a good option when you need to:

• Store goods before release into the Canadian market: You may need to bring goods into Canada before customer orders are confirmed, inventory is allocated, or the goods are ready for final distribution.
• Release goods in stages: You may be able to keep part of a shipment under bond and release goods later as business needs change.
• Re-export goods from Canada: Goods may enter Canada and later leave the country without being sold or used domestically.
• Support seasonal or uncertain demand: The program may help you hold inventory closer to the market without committing all goods to immediate customs clearance and release.

What to review before using the program

Before using a customs bonded warehouse, you should be clear about how the program will apply to your goods. Here is what you need to review:

Confirm whether your goods are eligible

Not all goods may qualify for storage in a CBW. Before using the program, review the type of goods, any restrictions that may apply, and whether the goods can be stored under bond.

Track the movement of inventory

It’s important to retain accurate inventory records. You need to be able to show what entered the warehouse, what remained under bond, what was removed, and whether the goods were exported or released into the Canadian market.

Plan for removal from the warehouse

Know when and how you’ll move your goods out of the warehouse. Goods can generally remain in a customs bonded warehouse for up to four years from the date they entered the warehouse, although time limits vary by type of goods. For example, beer and wine have a five-year limit, while other goods may be subject to shorter or longer limits.

Comment nous pouvons vous aider

At Cole International, we offer trade consulting and customs brokerage services to help Canadian businesses identify duty deferral opportunities.

Reach out to one of our trade professionals to discuss whether the Customs Bonded Warehouse Program may be suitable for your imports.