Shipping to Canada from the U.S.: Taxes and Duties for Small Items

Taxes and Duties When Shipping to Canada from the US

When you offer shipping to Canada from the US, it’s important to get acquainted with the document requirements, as well as taxes and duties. We’ve created this simple tax and duty guide for Canada to give you an idea of how these might affect your pricing and fulfillment process.

To really gauge the final amount that the customer will have to pay, you need to have an understanding of these 3 things when bringing in products to Canada:

  • Shipping charges
  • Sales taxes
  • Duties and any applicable exemptions
Impack-Colored Biodegradable Mailer Bags

Mailer bags over and above 16 oz. must be accompanied by customs documentation

A Quick Breakdown on Duties and Taxes in Canada

Glossary:

  • Duty: A type of tax imposed on products entering or leaving a country, 
  • Tax: Imposed on practically all purchases.
  • CBSA: Canadian Border Service Agency

Unless otherwise stated, you need to pay for duties and taxes for items coming from other countries.

There are a few exceptions below, according to the CUSMA agreement (jump to section):

 SHIPMENT VALUE TAX (GST/HST/QST/PST) DUTY
Up to CAD $40 Tax Free Duty Free
Above CAD $40 Taxes Apply* Duty Free
Above CAD $40 to under CAD $150 Taxes Apply* Duty Applicable, 0% to 25% based on product category**

*See Sales Tax Rates in Canada table below

**The CBSA has a very useful Estimate Duty and Taxes calculator. You can refer to this for the most up to date information:. This calculator does not take into account the CUSMA tax exemption for items under CAD $40.

Note: Canada, the United States and Mexico are countries under the CUSMA treaty, meaning if your product was made in Canada, the US or Mexico (CUSMA), you don’t have to pay Duty (you’re still subjected to Tax)

    Imoack Mailer Bags-Used by Kinder Cloth Diapers

    📷 By Kinder Cloth Diapers, a small, family run cloth diaper boutique based out of Pittsburgh, Pennsylvania. Photo shows the Olive Leaf Mailer Bag Design.

    Canada Taxes Debunk

    What are GST/HST/QST/PST? How do I know what I have to pay? 

    • GST: Goods and Services Tax
    • PST: Provincial Sales Tax
      • QST: Quebec Sales Tax (in Quebec specifically)
      • RST: Retail sales Tax (in Manitoba specifically)
    • HST: Harmonized Sales Tax, which is the combination of the provincial sales tax and the GST

    Canada has a Goods and Services Tax (GST) of 5%, applicable on virtually everything you can buy there. Your customers will have to pay that across the country. On top of that, people will also have to pay provincial sales tax, depending on where they live. 

    In other words, GST applies on every province, whereas the provincial sales tax is different in different provinces (they also have different names, hence the confusion to some people). 

    Sales Tax Rates in Canada (last updated March 19, 2022)
     PROVINCE PROVINCIAL SALES TAX (PST) GOODS & SERVICES TAX (GST) HARMONIZED SALES TAX (HST) TOTAL SALES TAX
    Alberta -- 5% -- 5%
    British Columbia 7% PST 5% -- 12%
    Manitoba 7% PST 5% -- 12%
    New Brunswick -- -- 15% 15%
    Newfoundland and Labrador -- -- 15% 15%
    Northwest Territories -- 5% -- 5%
    Nunavut -- 5% -- 5%
    Nova Scotia -- -- 15% 15%
    Ontario -- -- 13% 13%
    Prince Edward Island -- -- 15% 15%
    Quebec 9.975% QST 5% -- 14.98%
    Saskatchewan 6% PST 5% -- 11%
    Yukon -- 5% -- 5%

    FAQ

    What is the current trade agreement between the US and Canada?

    In 2020, Canada entered into a trade agreement with the U.S. and Mexico called the CUSMA (Canada-United States-Mexico Agreement). This has replaced the North American Free Trade Agreement (NAFTA).

    Tax and Duties to Pay When Shipping Small Items to Canada
    The CUSMA (Canada-United States-Mexico Agreement) affects the cost of duties and taxes when shipping small items to Canada.

    Under the CUSMA agreement, you need to take note of these 3 price structures for tax and duty:

    • Anything imported or produced from the U.S. as long as it is valued at CAD 20 or lower is exempted from both duty and taxes. 
    • For items manufactured in the U.S., the threshold is increased to CAD 40
    • Shipping items up to CAD 150 is not tax-free, but is duty-free.
    • For items costing above CAD 150, you will have to pay taxes and duties.

    See the exemption table above for a more simplified breakdown.

    What is the Duty-free threshold in Canada?

    The duty-free threshold is the value of the item in Canadian dollars, under which the duties are exempted to be paid. As mentioned previously, it is:

    • CAD 20 for items of Non-U.S. origin
    • CAD 150 for items made in the U.S. and Mexico

    Something to remember: Not everything circulating the U.S. market is manufactured here, so you need to be mindful of that too.

    Additionally, any items of a secretive or strategic nature and items intended for charitable purposes are not taxed, no matter the value.

    Which items do not qualify for Duty exemption?

    Some product categories have separate rules and regulations. The duty-free threshold doesn’t apply for these items:

    • Tobacco
    • Books
    • Periodicals
    • Magazines
    • Alcoholic beverages
    • Goods ordered through Canada post office box

    It is also important to note that  are certain items that are totally prohibited and are subject to restrictions, such as: 

    • Ammunition
    • Alcohol
    • Objectionable publications
    • Collectible coins

    Others, like drugs and medicines, may not be prohibited entirely, but they have to comply with Canadian law to be shipped. For such items, you will have to provide some additional documents in the form of a license or a certificate. To learn more about the documentation and the shipping restrictions, Easy Ship wrote a comprehensive article to cover the topic of restrictions.

      Duty Free Items for Canada

      It is also important to note that  are certain items that are totally prohibited and are subject to restrictions, such as: 

      • Ammunition
      • Alcohol
      • Objectionable publications
      • Collectible coins
        Prohibited Items When Shipping to Canada

        Others, like drugs and medicines, may not be prohibited entirely, but they have to comply with Canadian law to be shipped. For such items, you will have to provide some additional documents in the form of a license or a certificate. To learn more about the documentation and the shipping restrictions, Easy Ship wrote a comprehensive article to cover the topic of restrictions.

        What are the documents required when Shipping to Canada?

        Shipping to Canada is a multistep process that can seem a little confusing to business owners. Logistics costs vary based on the delivery services you choose and how quickly you need to get stuff shipped. We wrote an entire article on the cheapest ways to ship to Canada, which you might find helpful.  The most important thing to remember is that you will need to include customs documentation with all shipments, except for envelopes weighing less than 16 oz. (0.45 kg) or 1 lb.

        If you use Shopify, good news: They have the process built in, so you just need to follow the step-by-step instructions to complete the forms. Here is the guide on Printing Shopify Shipping labels and customs forms.

        Other major platforms or online shipping sites such as PirateShip or EasyShip should also have this process baked-in on their websites.

        If you need to buy shipping manually, you can easily find the customs forms on your logistics provider’s website. Here are the links to these top logistics providers if you want quick access to the documents.

        You can just fill them or use shipping software to make it easier for your team. You will have to upload the document once you have filled it out. Alternatively, you can just visit your local post office, fill out the PS 2976-R and submit the package.

        The list of documents required will vary based on what you want to ship. It may include some or most of the following. We have explained the commonly misunderstood documents towards the end of the article to help you understand what these terms mean.

        • Customs Declaration forms
        • Commercial invoice
        • Bills of lading (BOLs)
        • Canada Customs invoices (for goods worth over CAD 2,500 only)
        • Proof of delivery (usually included in the BOLs)
        • Electronic Export Information forms
        • CUSMA Certificates (to avail duty exemptions)

        Forms and Documents for Shipping Small Items

        Get the customs forms on your logistics provider’s website 

         

        Is there any duty and taxes calculator online?

        Absolutely. The Duty that customers in Canada need to pay vary depending on the product category, and Taxes also depends on where they live, that is one of the main reasons why things can get so confusing sometimes. 

        The calculator on the CBSA official site is very helpful on telling you exactly how much duty and taxes a person in Canada is subjected to, based on where that person is located, the value of the item and the type of product. This calculator does not take into account the Tax exemptions such as for items under CAD $20 made from any other countries, or items under CAD $40 made from the US, Canada or Mexico

        EasyShip also has a similar calculator that also calculate the taxes and duty. However, the main differences are:

        • EasyShip’s calculator takes into account of the imports from other countries too, not just for Canada. 
        • It does not take into account the different provincial taxes, nor the CUSMA exemption of items under CAD $40 that were made in either the US, Canda or Mexico. 

        You can check out their tax calculator here.

        Standard Shipping Terms You Might Come Across

        Need help familiarizing yourself with the commonly used terms when shipping? We’ve compiled the ones that your couriers and customs officers might use often. Here are the ones you’ll encounter frequently:

        Commercial Invoice

        This is a customs document provided by the party shipping the items. It includes information regarding the goods being transported, the shipments' parties, and the country where the items were manufactured. 

        Bills of Lading

        It is one of the most important documents in international shipping. It serves as a receipt for the shipped products. It is, basically, a detailed list of the ship’s cargo that the in charge of the ship will hand to you. The bill also includes the agreed terms and conditions for transporting the goods.

        Canada Border Services Agency (CBSA)

        This government agency facilitates the smooth flow of trade and enforces custom laws in Canada. You can read all about them on their official website. There is also a lot of information regarding taxes, benefits, and importation laws on their site.

        Customs Declaration Form

        It lists the details of any shipment when it is imported or exported. You can get the customs forms from your logistics provider’s website, as we’ve linked above.

        Shopify Shipping

        If you’re in the e-commerce business, you’ve probably heard of Shopify. Shopify Shipping lets you integrate shipping services into your Shopify site. Some of its best features that might be helpful when computing taxes and duty includes:

        • Automatic calculation of shipping rates and showing them to your customers instead of getting inaccurate and frequently misleading flat rates.
        • It provides significant discounts while buying shipping labels from most of the major carriers in the U.S.
        • It allows you to print your shipping labels directly from Shopify admin. 
        • This feature will enable you to print labels in advance. 
        • This will make your fulfillment process faster.
        • Shopify can manage products, customers, and inventory, all in one place.

        Free Shipping Supplies That Can Help Reduce Cost 

        Shipping envelopes or padded envelopes are necessary shipping supplies. We wish that we could just pack your goods in them and send them on their merry way, but finding shipping supplies can be costly, especially for smaller businesses.

        We’ve recently compiled some ideas on how you can get free shipping supplies from couriers and help you spend less on these essential packaging materials. Click here to read our article on free shipping supplies!

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