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Canada’s Response to U.S. Automotive Tariffs

04/15/2025 | Dominion Customs Consultants Inc | ,

CBSA Customs Notice 25-15: United States Surtax Order (Motor Vehicles 2025)

April 8, 2025

Below is a summary of Canada Border Services Agency (CBSA) Customs Notice 25-15, Canada’s response to the recently announced U.S. Automotive and Auto Parts Tariffs. To review the full customs notice, please click on the link below:

Customs Notice 25-15: United States Surtax Order (Motor Vehicles 2025)

Application

  • Effective Date: A 25% surtax on U.S. motor vehicles imported into Canada will take effect on April 9, 2025.
  • Surtax Applicability: This surtax applies to both new and used motor vehicles, including those with electric and internal combustion engines.
  • Types of Vehicles Affected:
    • Passenger Vehicles: Includes cars designed for transporting less than ten persons, such as:
      • Passenger cars (including racing cars and station wagons)
      • Crossovers, SUVs, and passenger vans
      • Motorhomes, ambulances, hearses, and prison vans
    • Goods Transport Vehicles: Motor vehicles for transporting goods with a gross vehicle weight not exceeding 5 tonnes (excluding those converted to ambulances).
  • Exemptions: Vehicles not subject to the surtax include:
    • Snowmobiles and golf carts (Tariff Item No. 8703.10)
    • Motor vehicles with spark-ignition engines of cylinder capacity not exceeding 1,000 cc (Tariff Item No. 8703.21).
  • Trade Agreement Impact: The surtax applies regardless of any preferential tariff treatment under the Canadaโ€“United Statesโ€“Mexico Agreement (CUSMA).
  • Tariff Treatment: If a vehicle qualifies for the CUSMA preferential tariff rate, the value of goods originating from Canada or Mexico used in its production is excluded from the duty value calculation for the surtax.
  • Surtax Overview: A surtax of 15% applies to motor vehicles originating in the U.S., calculated at 85% of the total value for duty.
  • Exclusion Criteria: Importers can claim a higher exclusion by providing evidence of the value of goods from Canada or Mexico used in production. This includes:
    • Valid CUSMA certification of origin
    • Compliance records for Regional Value Content (RVC)
    • Documentation for Canadian/Mexican parts used
  • Verification Process: The CBSA may verify the claimed values to ensure compliance. If discrepancies arise, the surtax may be recalculated based on the standard 15% content.
  • Exemptions: The surtax does not apply to:
    • Goods marked as originating from Puerto Rico, Guam, or similar territories.
    • Items classified under specific tariff chapters (Chapter 98 and Chapter 99), with exceptions for certain vehicles and parts.
  • Remission Programs: Goods eligible under the Akwesasne Residents Remission Order may have the surtax remitted. Additionally, Canadaโ€™s Duties Relief and Duty Drawback Programs are available for surtax paid under CUSMA.

Proof of origin

  • Proof of Origin Requirement: Under subsection 35.1(1) of the Customs Act, all imported goods must provide proof of origin, with exceptions noted in the relevant regulations.
  • Documentation for Commercial Goods: For commercial imports, proof can be a commercial invoice or other documents that meet the minimum data elements specified in Annex 5-A of CUSMA.
  • Criteria for Personal Imports: Casual goods, or personal imports, are deemed to originate from the U.S. if they are marked accordingly or lack a country of origin marking with no evidence of alternative origins.
  • Goods from Other Countries: Casual goods marked as made in or originating from the U.S. but imported from other nations are also considered to originate in the U.S.

Calculation of surtax when accounting for commercial importations

Exceptions to surtax

  • The surtax will not apply to U.S. goods that are in transit to Canada on the day the surtax comes into force. This includes goods that were already in transit before the surtax was enacted.
  • Definition of ‘In Transit’: Goods that are bound for Canada but have not yet arrived, and are under the control of a carrier.
  • Required Documentation: Importers must possess proof that goods were in transit to Canada, which may include:
    • Shipping documents (e.g., bills of lading)
    • Report of entry documents
    • Cargo control documents
    • Note: Documentation may be requested by a CBSA officer at any time.
  • Scenarios Where Surtax Does Not Apply:
    • Temporary Importation of Foreign Motor Vehicles: For instance, a U.S.-registered truck transporting cargo or a U.S.-registered electric vehicle driven into Canada by a U.S. tourist.
    • Returning Canadian-Registered Motor Vehicles: Vehicles made in the U.S. and duty-paid, such as a Canadian tourist returning from the U.S. in a U.S.-origin vehicle that was previously accounted for under the Customs Act.
    • Repairs Across the Border: U.S.-made vehicles repaired in Canada or Canadian-registered vehicles repaired in the U.S., including both emergency and non-emergency repairs.

Accounting

  • Surtax Declaration Requirement: Importers must declare imported goods subject to a surtax when completing a Commercial Accounting Declaration (CAD) via the CARM Client Portal (CCP), Electronic Data Interchange (EDI), or Application Programming Interface (API).
  • Surtax Field: The amount of surtax owed is entered in field 85 โ€œSurtaxโ€ of the CAD. If opting for self-declaration, importers must calculate and enter this amount.
  • Surtax Codes:
    • 25118A: For motor vehicles not entitled to the United States Tariff.
    • 25118B: For motor vehicles entitled to the United States Tariff with Canadian and Mexican-origin parts valued at 15% or less.
    • 25118C: For vehicles entitled to the United States Tariff with parts valued over 15%. Importers must calculate the surtax payable according to specific examples provided.
  • CUSMA Preferential Tariff Treatment: To qualify for CUSMA treatment, importers must select โ€œUnited States Tariff (UST)โ€ in their declaration, ensuring compliance with all CUSMA requirements.
  • Accounting Instructions: Follow the guidelines in Memorandum D16-1-1 for accounting for surtax under the United States Surtax Order (Motor Vehicles 2025).
  • Exceptions: Commercial goods qualifying for surtax exceptions must be declared as non-subject to surtax during accounting.
  • Additional Information: For more details on completing the CAD when declaring surtax amounts, refer to Memorandum D17-1-10. Casual goods are addressed under Memorandum D17-1-3.

Corrections, re-determinations, and refunds

  • Corrections and Adjustments: Adjustments to original customs declarations must follow the prescribed forms and procedures outlined in the Customs Act.
  • Relevant Memorandums:
    • Memorandum D11-6-6: Covers self-adjustments related to declarations of origin, tariff classification, and value for duty.
    • Memorandum D6-2-3: Details the process for refunds of duties.
    • Memorandum D6-2-6: Discusses refunds for duties and taxes on non-commercial importations.
  • Commercial Goods Adjustments: If surtax was incorrectly self-assessed for commercial goods, adjustments can be submitted via the Customs Accounting Declaration (CAD) through the Customs Client Portal (CCP) or EDI/API. For guidance, refer to Memorandum D17-2-1.
  • Casual Goods Adjustments: For casual goods, requests must be made using Form B2G, CBSA Informal Adjustment Request. Note that these cannot be submitted through CARM. For more details, consult Memorandum D6-2-6.
  • Re-determination of Goods: The origin, tariff classification, and value for duty of imported goods may be re-evaluated in accordance with the Customs Act and relevant regulations, which may include undeclared surtax amounts.

Examinations and verifications

Imported goods may be subject to examination at the time of importation and to post-release verification for compliance with the Tariff Classification, Valuation, Origin, and any other applicable provisions administered by the CBSA. In cases of non-compliance, in addition to the imposition of surtax, customs duties and taxes, penalties may be assessed, and interest may accrue on the amount owing.

Advance rulings for commercial importations

For predictability and certainty on how goods are to be accounted for, a binding ruling on the Free Trade
Agreement (FTA) Origin, tariff classification, or marking of goods imported from a Canada-United States-Mexico Agreement (CUSMA) country in advance of the importation of goods can be requested under the Customs Act.

Refer to the Rulings for tariff classification, valuation, origin, and marking: Overview, Memorandum D11-4-16: Advance Rulings for Origin Under Free Trade Agreements and Memorandum D11-11-3: Advance Rulings for Tariff Classification for additional information.

Recourse

In accordance with the Customs Act, and section 12 of the Customs Tariff Act, those who have received a notice of re-determination or further re-determination under s.59(2) of the Act, may request review under s.60 of the Customs Act within 90 days and after having paid amounts owed. Refer to Memorandum D11-6-7: Request under Section 60 of the Customs Act for a Re-determination, a further Re-determination or a Review by the President of the Canada Border Services Agency for details.

Should you or your organization have any questions,

please do not hesitate to contact your Dominion Customs Consultants representative,

or feel free to reach us here

U.S. Tariffs: Automobiles & Automobile Parts into the U.S.
Canadian Remission Process for Tariffs on U.S. Goods