Archive for May, 2010

Canadian companies can develop new export opportunities to Colombia
Thursday, May 6th, 2010

The following is excerpted from the 27 April 2010 edition of “globeandmail.com”.

Canadian companies can develop new export opportunities to Colombia – and steal market share from the United States – once a new free trade agreement is ratified with the South American nation, Colombian Trade Minister Luis Plata says.

While talks toward a U.S.-Colombia free-trade agreement have stalled, Canada appears on track to pass a trade deal with Colombia in coming weeks, eliminating tariffs on products that are still subject to trade barriers with the U.S….

[Plata] said it would be logical for Colombians to shift more purchases of agricultural products like wheat, corn and barley from the U.S. to Canada if they can be imported more cheaply. Colombian products heading to Canada, which often arrive by way of a U.S. importer, could begin flowing directly, he said.

And Mr. Plata said other new business opportunities will inevitably emerge with a country of 45 million people once a deal is in place, suggesting, for example, that Colombia could begin exporting biofuels to countries like Canada. Trade between the two countries totalled about $1.3-billion last year, accounting for less than 1 per cent of Canada’s trade….

The biggest challenge, however, remains Colombia’s reputation for violence, illegal drugs and a long-running rebel insurgency – a reputation Mr. Plata said is out of date.

Since the government of President Alvaro Uribe took office in 2002 and launched a “tremendous effort” to reform policing and the judiciary, Mr. Plata said the country’s murder and kidnapping rates are down 50 per cent and 85 per cent respectively since 2002, and that a history of violence against union organizers is also being curbed.

Colombia, he said, is now launching a rebranding campaign to alert the world to its improving legal and human rights record.

“I’ll never deny we have difficulties and challenges, but right now the reality in Colombia is far better than it was seven years ago, and it’s far better than the image that we have,” Mr. Plata said.

… The Liberals have already agreed to support the deal after winning a concession that both countries will conduct an annual review of their respective progress on human rights violations. Mr. Plata said each government will do its own human rights assessments under the proposed compromise. Colombia’s will be done by his trade ministry, he said.

Colombia is now pursuing free-trade deals with 49 countries as part of a pro-business stance that has opened the country for trade since 2002. Canadian companies have directly invested over $4-billion in Colombia in the past five years, especially in the mining sector….

HST and Customs Broker’s Service
Monday, May 3rd, 2010

HST and GST: CRA Provides Answers

The Canada Revenue Agency has provided answers to questions asked by CSCB members regarding HST on customs brokers’ services. These questions and answers are reproduced below and are also available as a PDF document.

Members with additional questions, or questions regarding any of the information contained in this message, can contact the CSCB at cscb@cscb.ca.
CSCB: The Canada Border Services Agency requires an export permit for certain goods being exported from Canada. A Canadian customs broker applies for the export permit (in Canada) on behalf of the Canadian exporter.

(a) If the Canadian exporter is registered for the GST, does GST/HST apply to the broker’s service for applying for the permit?  What if the Canadian exporter is not registered?

CRA: A supply of a service is made in Canada by a Canadian customs broker.  A determination would have to be made as to whether the supply of the service is made in a participating province, using the proposed place of supply rules in respect of services announced by the Department of Finance on February 25, 2010, in its document “Place of Supply, Self-Assessment and Rebate Rules for the Harmonized Sales Tax (HST) <http://www.fin.gc.ca/n10/data/10-014_1-eng.asp> ” and by the CRA on February 26, 2010, in its document “Place of Supply Rules for Determining whether a Supply is Made in a Province <http://www.cra-arc.gc.ca/E/pub/gm/b-103/b-103-e.pdf> “.  There are no provisions in the ETA that would zero-rate the GST or HST in this scenario.  As a result, GST could be payable at the rate of 5% or HST could be payable at the rate of 12%, if the service is deemed to be made in BC, or 13%, if the service is deemed to be made in the other participating provinces.  Note that the rate of HST in Nova Scotia is proposed to increase to 15%.

The answer is the same for a Canadian exporter who is not registered.

(b) If a registered U.S. importer of the goods is billed by the Canadian customs broker for obtaining the export permit, does GST/ HST apply to the broker’s service?  What if the U.S. importer of the goods is not registered?

CRA: We assume that the U.S. importer is the recipient of the service supplied by the Canadian broker.  While the supply of the service would be deemed to be made in Canada, the supply of the services would likely be zero-rated under Part V of Schedule VI to the ETA.  Because a customs broker would often be considered an agent of its client, section 5 of Part V of Schedule VI would apply to zero-rate a supply made to a non-resident person of a service of acting as the person’s agent or of arranging for, procuring or soliciting orders for supplies by or to the person, where the service is in respect of a supply to the person included elsewhere under Part V of Schedule VI or a supply made outside Canada by or to the person.

Where an agency relationship does not exist, it is possible that the general zero-rating provision for services under section 7 of Part V of Schedule VI may apply to zero-rate the supply to the unregistered non-resident.

The answer is the same for a U.S. importer who is not registered.

***


CSCB: If a Canadian customs broker who is also licensed as a U.S. broker prepares an entry for goods entering the U.S., and bills for this service from within Canada, is the service taxable if it is billed to the U.S. non-registrant importer? U.S. registrant importer? What if the Canadian exporter is billed for the preparation of a U.S. customs entry?

CRA: We assume that part of the service is performed in Canada, and therefore the place of supply of the service is deemed to be made in Canada.

The location at which a supplier prepares a bill for a supply is not relevant for determining the tax treatment of the supply.  Under the ETA place of supply rules for services, a service will be deemed to be supplied in Canada if it is performed, or is to be performed, in whole or in part in Canada.  As a result, a supply of a broker’s service that is made in Canada will generally be subject to GST at the rate of 5%, or HST at the rates of 12% or 13% if deemed to be supplied in BC or the other participating provinces, respectively, if the recipient of the supply is a Canadian resident  (note that the rate of HST in Nova Scotia is proposed to increase to 15%).

If the recipient is a non-resident, and the Canadian broker is acting as the recipient’s agent when the service is being provided, the supply of the service would likely be zero-rated under section 5 of Part V of Schedule VI, regardless of the non-resident’s GST/HST registration status.

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CSCB: Can you clarify customs brokerage services that are zero-rated? Does the fact that exports are zero-rated mean that any services provided with respect to exported goods are not subject to GST/HST? Are examples available?

CRA: Customs brokerage services may be zero-rated if they meet the conditions outlined in section 5 of Part V of Schedule VI to the ETA, as described in 1(b) above.  If an agency relationship does not exist between the broker and the client, section 7 of Part V of Schedule VI may zero-rate the supply of the broker’s services where none of the exclusions in the provision apply.

Regarding the second part of your question, the tax status of brokerage services depends on:

a) Whether the service is performed in whole or in part in Canada (if not, the supply of a service is considered to be made outside Canada and is not subject to GST/HST);

b) If the supply is deemed made in Canada, whether the supply is determined to be made in a participating province in accordance with the place of supply rules for customs brokerage services outlined in Finance’s announcement of February 25, 2010 and CRA’s Technical Interpretation Bulletin of February 26, 2010.  Note that where the supply of a service does not meet the description of a “customs brokerage service” under the Place of Supply (GST/HST) Regulations, the general place of supply rules for services, as outlined in both the Finance and CRA documents, will apply to determine if the supply is made in a participating province; and

c) Whether the conditions for zero-rating under section 5 or 7 of Part V of Schedule VI to the ETA are met, as discussed above.


No examples are specifically available.

Canada-EU Economic and Trade Agreement…
Monday, May 3rd, 2010

The following is excerpted from the 30 April 2010 news release by DFAIT.

The Honourable Peter Van Loan, Minister of International Trade, took his free trade message to Toronto’s business community today in support of a Canada-European Union comprehensive economic and trade agreement. In a keynote speech to the Economic Club of Canada he said Canadians stand to benefit from strengthened economic ties with the European Union, the world’s wealthiest single common market.

According to a Canada-European Union joint study, a deal is expected to deliver a $12-billion annual boost to the Canadian economy.

“In addition to lowering taxes, investing in innovation and promoting freer enterprise, our government is expanding market opportunities to help Canada’s economy on the path to a lasting recovery,” said Minister Van Loan. “A comprehensive economic and trade agreement with the European Union will free trade, open doors for our businesses and create jobs for Canadians.”

For Canada, these negotiations represent our most significant trade initiative since the North American Free Trade Agreement. The North American Free Trade Agreement has doubled Canada’s trade with the United States, tripled trade with Mexico and created nearly 4.1 million jobs since it came into effect in 1994.

The Canada-European Union talks include the participation of the provinces at the table—a first for a free trade negotiation. Minister Van Loan underlined the important role of the provinces in working to deliver a successful agreement, on schedule, that aims high.

A third round of talks began in Ottawa on April 19. A fourth negotiating round will take place in Brussels in July 2010.

An agreement will benefit many sectors of the Canadian economy, including aerospace, chemicals, plastics, aluminum, wood products, fish and seafood, automotive vehicles and parts, agricultural products, transportation, financial services, renewable energy, information and communication technologies, engineering and computer services.

The European Union is the world’s largest exporter of goods and services and is Canada’s second most-important partner for trade and investment after the United States.