If you import clothing into Canada, you need to understand tariff classification. Tariff classification determines the duties and taxes on your imported goods. The Canadian government regulates its garment labeling requirements, with each piece of clothing needing a specific code based on its material, design, and use, so getting this right is a must. Proper classification ensures you pay the correct duties and helps move the customs clearance process along smoothly.

Canada’s clothing import market is huge, with over $17 billion worth of apparel brought in during 2022 alone. The last thing you want is for your goods to be delayed or fined at the border due to incorrect tariff classification. Working with a customs broker like Clearit can ensure you provide detailed product information for accurate classification, avoid issues at customs, and keep your import process smooth and efficient.

Canadian Clothing Tariff Classification Compliance

As the Importer of Record, you are responsible for reporting and accounting for your imported goods to the CBSA. This includes:

  • Accurate description and correct value declaration.
  • Compliance with regulatory requirements, statutes, regulations, and government requirements.
  • Making sure goods are not prohibited from entering Canada.

To ensure that the appropriate amount of duties and taxes are paid and that import statistics used for domestic purposes are collected accurately, you will need to assign your clothing shipment the right tariff classification. In Canada, the Harmonized Commodity Description and Coding System (HS), developed by the World Customs Organization (WCO), is used. As such, each tariff classification number consists of 10 digits:

  • The first six digits are standardized internationally.
  • The seventh and eighth digits highlight break-outs for Canadian trade purposes.
  • The last two digits are for statistical purposes.

The classification number should be entered in the commercial accounting Form B3-3, Canada Customs Coding Form (field 27).

Why Clothing Tariff Classification Is Important

Getting your tariff classification right not only saves money but also keeps your business running smoothly. This is because tariff classification plays a big role in the cost and competitiveness of imported clothing. When you import apparel, the tariff code assigned determines the duties and taxes you’ll pay. Accurate classification ensures you pay the correct amount, which generally amounts to 17% or 18% of the clothing’s worth (some clothing items can be imported at a reduced duty rate under Tariff Preference Level (TPL)). Doing so prevents unnecessary costs that reduce your profit margins, allowing you to offer more competitive prices to your customers.

Note, to qualify for TPL, importers must first secure an import permit from Global Affairs Canada.

Accurate classification is also key for compliance with Canadian trade laws. As the Importer of Record, you’re responsible for the accuracy and completeness of the import declaration and the payment of duties and taxes. Namely, duties and taxes must be paid when the goods enter Canada, and if you fail to comply, you could face legal repercussions such as fines, shipment delays, and even the seizure of your goods. Non-compliance may also damage your reputation, causing a loss of trust among customers, suppliers, and other stakeholders.

Common Clothing Classification Challenges

Let’s say you’re importing those cute hooded towels kids wear after swimming. You know they’ll be a hit at the beaches and pools this summer, but first, you need to make sure they clear customs. To do that, you have to start by answering one essential question: are they classified as “towels,” or as “clothing?”

The dual nature of hooded towels, which serve as both functional towels and wearable items, complicates the classification process. And what if the hooded towel is to be sold together with a swimsuit or flip-flops? Classifying clothing sets sold together can be unclear. These sets might be classified as separate items or as a single unit, further complicating the process and potentially impacting duty rates.

What’s more, identifying the precise blend of materials can be difficult if labeling is unclear or incomplete, which is a common issue in the apparel industry. Tariff codes may not perfectly match new or innovative clothing items, leading to confusion about the appropriate category and potential errors in classification.

And, if that weren’t enough, customs tariff codes are complex and frequently updated, making it challenging for importers to stay informed and compliant with the latest regulations.

Benefits of Accurate Tariff Classification

Despite the challenges, accurate tariff classification offers several key benefits to importers:

  • Determines the correct duty rates you need to pay, protecting against anti-dumping duties that could hurt your bottom line
  • Helps goods qualify under Free Trade Agreements and asserts Canada’s rights under trade agreements, ensuring fair trade practices and protecting Canadian businesses from unfair trade measures
  • Facilitates exporting to countries other than the U.S., ensuring the fulfillment of export requirements and avoiding shipment delays or penalties
  • Helps businesses adjust to competitive pressures, keeping them viable in the market by allowing them to price their products competitively
  • Improves market access for Canada’s trading partners, enhancing trade relationships by making Canadian exports more attractive
  • Ensures compliance with health and safety regulations, protecting consumers by adhering to strict standards
  • Allows Canada to impose emergency surtaxes on harmful imports, safeguarding domestic industries from unfair competition

Streamline Your Import Process with Proactive Tariff Classification

Taking a proactive approach to tariff classification ensures compliance and streamlines your import process. Using classification software can minimize errors by assigning the correct codes. It must, however, come hand-in-hand with detailed documentation of your product descriptions, materials, and uses. Staying updated with the latest tariff codes and regulations is also essential to avoid misclassification.

Consulting experienced customs brokers like ClearIt can help you navigate the complexities linked to tariff classification, customs clearance, and clothing imports, ensuring your shipments move through customs without delays or penalties.