This was posted on Timezone.com by a Canadian WIS named Alvin. He also happens to be a customs agent who had some scary things to say. Read on.
A definitive guide to Customs : Feb 08, 2004 - 11:15 PM
All the following applies to Canadian importers. Follow these guidelines, and you will be enlightened as to why things happen the way they do, and also to avoid certain pitfalls.
Firstly, all watches made overseas fall under the most favoured nation tariff treatment - they attract a duty rate of 5%. On top of that, regardless of where the watch is made, this item will also be taxed at a 10% excise tax rate, 7% GST rate, and in some modes of shipment, such as the postal stream, a 7% PST rate.
Here's how they are assessed: Upon its arrival at the Customs clearance area (or Customs Postal Unit) a watch's value needs to be arrived at for tax purposes. This can be gleaned from either the declaration, or, upon inspection, an invoice. Then, if that value is accepted (they're not idiots, they have lives, and expensive hobbies, too, and they know the difference between a Vostok and a Vacheron), the calculations are as follows:
The transactional value is converted into Canadian dollars (CAD), using the exchange rate of the day - that value is called the value for duty (VFD). If the VFD is over 50 CAD, a 50 CAD excise exemption is taken from that root value. (It simply means that all those taxes will be calculated on whatever value your watch is in CAD, less 50 dollars).
Next, a 5% duty rate is applied to the residual VFD, and then added to the original VFD. That combined value is called the value for tax (VFT) It is upon this value that a 10% excise rate and a 7% GST rate are applied. Here is an example:
You buy a watch for 1,000 USD - first convert the value to CAD using the exchange rate of the day, say, 1.32, so:
1,000 X 1.32 = 1,320 (VFD)
1,320 - 50 = 1,270 (Excise exemption)
1,270 X 5% = 63.50 (Duty)
63.50 + 1,270 = 1,333.50 (VFT)
1,33.50 X 10% = 133.50 (Excise tax)
1,33.50 X 7% = 93.35 (GST)
1,33.50 X 7% = 93.35 (PST)
1,000 USD - applicable duties and taxes = 383.70 CAD
Clear as mud?
This does not include, as has been mentioned, a flat fee from UPS (called a brokerage fee), or a 5 dollar Postal admin fee (when shipped in the Postal stream)
Now, how come some get through untouched, and others not? Here's why - Firstly, you have to consider the volume of shipments that arrive into Canada on a daily basis - it's voluminous! Not every single package in every single mode can be physically examined to verify that it has a correct declaration; citizens would be in an uproar, and it would take months for you to get your watch, literally. So, to facilitate the flow of goods, Customs relies on importers (or vendors abroad) to accurately declare the value of the goods being carried. Since they can't look at every one, some do 'get through' without any assessed taxes. In addition, sometimes the odd package gets dropped down the chute (in the Post office) by accident, or it’s misread in a hurry to keep up with the flow - it happens.
Additionally, Customs minds are pre-occupied with larger tasks and concerns, i.e., terrorism, hazardous goods, criminality.
Now, some tips for declaring goods: This one’s easy….declare everything in full. There, done. I know first hand stories, in which an importer had a vendor ‘fudge’ an invoice to less than half. At first, it seems like a steal of a deal. (Technically, that’s correct. The government looks at it like that, anyway). The person was challenged as to the value of the watch, and the invoice was deemed very quickly to be fraudulent. The result was a customs seizure of the watch outright; later the watch was offered back to the importer at an additional 60% of the value. On top of that, the importer was prosecuted and fined an additional 2,000 dollars, In the interim, the watch had sat in the evidence room for over a year.
Some ancillary notes: If your watchstrap is made from leather from an endangered species (unlikely in most cases), whether you declare it or not, if there’s no permit from the originating country, it’s gone. Except in extreme cases where the strap is worth half the price of the watch, it’s not necessary to break down the price into separate components.
As a fellow WIS, I urge you not to follow some others’ advice to ship empty boxes home and wear the watches back through Customs. As you glibly walk through untouched (again, they can’t search everyone), you may feel some satisfaction that you’ve ‘sneaked one through’ on some officer who, quite frankly, has far more pressing and important issues on his or her mind like looking for that abducted child, the terrorist, etc... That is, if you get through
The postal unit has for years flagged empty watch boxes as a ‘no brainer’ investigation to be done in the weeks that follow their entry. This involves men with badges knocking on your door. If you think I’m exaggerating, I’m actually doing one next week. Now, that’s embarrassing for the person on the other side of the door. Very embarrassing.
Further to that issue, any person who finds that they are in possession of an unlawfully imported watch (at home) is in violation of Sec 155 of the Customs Act. They have 90 days to make a voluntary entry, no questions asked.
By now, you’ve likely figured out I work for Customs, in the Customs Investigations Division, to be exact. I’ve rarely discussed it here, because here, I’m a WIS just like everyone else. But any one counselling others to smuggle just naturally hits a nerve. Sure, I can easily see the motivation, but it’s simply not worth it.
This will explain why, when shopping for watches in Canada, I have had to ask the unusual question: Is the watch legally imported? It’s strange, but you must understand I am held up to the highest standards – if I am caught wearing a ‘hot’ watch, I am subject to the same provisions as the subjects who get prosecuted. So when I ask you, a Canadian SC seller, that question one day, please don’t freak out, I’m just covering my butt :-D
Thanks for staying for the whole read – I hope it was helpful and informative. Lecture’s over.
"Veritatem dies aperit."