To benefit from duty-free entry into Canada, textile apparel made in a Least Developed Country (LDC) e.g. Bangladesh, must meet the following criteria:
- the yarns and fabrics used in the outer shell must be made in a LDC or GPT country, and if GPT (e.g. China), at least 25% of the cost of production must occur in a LDC (e.g. Bangladesh).M
Similar rules of origin also apply when other preferential tariff treatments such as NAFTA, CIFTA, and GPT are utilized.
Canadian importers that purchase goods with the benefit of a free trade or other preferential tariff treatment must keep proof of origin on file for 6 years following importation, and should expect their suppliers to maintain certain information in order to avoid costly assessments resulting from lack of information during audits performed by the Canada Border Services Agency.
For most textile products, information must prove the origin of the yarns and materials, and demonstrate the percentage of production that occurs in the beneficiary country.
For example, under the Least Developed Country Tariff (LDCT) exporters must ensure that the value of all materials, parts or products, including threads, linings, interfacing, trims, zippers, buttons or fasteners that originate outside Canada, or the LDC in which the goods are assembled, is no more than 75% of the ex-factory price of the goods as packed for shipment to Canada.
All suppliers of goods eligible for preferential tariffs should be expected to keep the following records on file for 4 years after shipping:
- production (cutting and sewing) records
- inventory and receiving records (for all materials used in production)
- cost accounting records (e.g. bills of materials linked to general ledgers and payable records)
- shipping records
Typical source documents reviewed during a customs compliance verification audit:
- Purchase Orders
- Invoices
- Accounts Payable Listings
- Bills of Lading
- Journal Entries
- Cancelled Cheques
- Receiving Vouchers or Memos
- Correspondence Files Related to Shipments
- Packing Slips
- Bank Drafts
- Inventory Records
- General Ledger & Trial Balance
- Vendor Lists
- Financial Statements
Information on this and other recent developments can be obtained from our senior consultants.