The Modernization of Duty Drawback:

When a Canadian business imports a good into Canada they are required to pay an import tax on the good at the time of import.  In accordance with NAFTA, the Canadian government implemented an import tax program known as duty deferral to help Canadian companies compete in export markets by allowing them to recover these duties paid on imported goods. Duty drawback allows an importer to claim this import tax back in the event the good is either exported out of the country or destroyed if it is a surplus or obsolete good.

As landfill bans continue and extended producer responsibility is introduced for new materials, companies in Metro Vancouver are facing more pressure than ever to responsibly dispose of waste, in this case including non-salable obsolete or surplus goods. In an effort to responsibly dispose of these goods (such as garments, electronics, accessories) companies are willing to pay more to ensure that the materials found in these goods are recovered via recycling technologies. The goal is to divert this waste from the landfill/incinerator to support the current recycling regulation and satisfy consumer expectation for corporate environmental responsibility.

The issue however is that according to the Canada Border Service Agency’s Customs Tariff Agreement in order for a good to qualify for the duty deferral program the good must be “destroyed” where no commercial value remains in the salvageable waste material.  In short, what this means is that in order for a company to be eligible to claim duty drawback on any obsolete or surplus good, they must destroy and landfill the good. The decision to recycle the material, regardless of its impact on the environment or its role in the recycling regulation/EPR, would make it ineligible for duty drawback.  This provides an incentive for companies to forego their environmental practices and is in opposition to the Recycling Regulation and Canada’s goal to divert waste and apply Extended Producer Responsibility programs.

UPDATE:  After a presentation to the Waste Management Committee of Metro Vancouver on the reformation of these outdated duty drawback laws, debrand Services Director Amelia Ufford, has received confirmation that the committee is in support of this effort. The Board Chair has since written to the Canadian Border Service Agency (CBSA) requesting that the Duty Drawback law be reformed to be compatible with current recycling and sustainability goals.  With Metro Vancouver’s help we may be getting closer to develop incentivizing recovery of these valuable resources rather than encouraging destruction. We are currently awaiting the response from CBSA.