As the Canadian dollar strengthens against the U.S. currency, more Canadians are shopping for the wider range of vehicle choices available south of the border. A stronger loonie makes for increasingly affordable automobile prices.
To maximize cost savings, potential importers should carefully research the following potential taxes, fees and other charges. These expenses quickly add up. In some cases, the business case for importing an American-made vehicle into Canada becomes much harder to justify.
Tariff Duties on Imported Automobiles
Canada Border Services Agency (CBSA) is the first point of contact when a vehicle is imported into Canada.
No duty is payable if an imported car or truck has a valid North America certificate of origin (Form B232 E).
The CBSA normally collects a 6.1% tariff duty on foreign automobiles, although any vehicle over 25 years old and all motorcycles are duty free.
State Taxes on Exported Vehicle Sales
Many individual and commercial importers overlook the fact that some U.S. states waive sales taxes on vehicles sold for export.
States with sales-for-export exemptions include Delaware, Oregon and Michigan.
The cost savings on an imported vehicle can be significant, given that Canadian taxes are assessed on a vehicle’s gross price which includes any state taxes.
Excise Taxes on Imported U.S. Passenger Vehicles
Excise taxes on imported passenger vehicles depend on vehicle make and model specifications such as engine size, interior volume and fuel consumption.
For all imported vehicles, an excise tax of $100 applies for each automotive air conditioner system.
In addition, the following excise taxes are imposed on vehicles that first went on the road March 20, 2007 or later.
- Gas Guzzler Tax (Green Levy) with rates based on fuel a vehicle burns over 100 kilometers.
- Escalating Weight Tax for passenger vehicles weighing over 2,007 kilograms (4,415 pounds).
The Escalating Weight Tax also applies to newer vans or station wagons that weigh more than 2,268 kilograms (4,990 pounds).
The Green Levy excludes motor homes and pickup trucks, but is assessed on all passenger vehicles that have a fuel consumption rating of 13 liters or more per 100 kilometers (62.1 miles).
Below are Green Levy rates based on fuel consumption per 100 kilometers:
- 13 but less than 14 liters …. $1,000 excise tax amounts
- 14 but less than 15 liters … $2,000
- 15 but less than 16 liters … $3,000
- 16 or more liters … $4,000.
Canadian Sales Taxes on American-made Cars and Trucks
The federal Canadian Goods and Services Tax (GST) is 5%, and is imposed on all imported vehicles.
On July 1, 2010, the Harmonized Sales Tax will become payable for imported vehicles delivered in the provinces of Ontario and British Columbia.
Additional Fees on Imported Vehicles
Transport Canada’s Registrar of Imported Motor Vehicles charges a fee of roughly $200 for vehicles less than 15 years old. For that fee, the importer receives Form 1 (Vehicle Import Form) – a mandatory CBSA document for commercial imports.
The most surprising hidden fee on U.S. vehicles imported into Canada is the $43 inspection charge (as of August 2007) that the Canadian Food Inspection Agency charges. That fee can be triggered if CBSA officials notice evidence of soil or mud on the vehicle that may carry harmful pests dangerous to Canadian agriculture.
If the CFIA detects any contamination, then the importer must also pay an authorized cleaning company to sanitize and power wash the soiled or muddy vehicle. Cleaning expenses can range from $60 to $400.
Other Charges Assessed on American Imported Automobiles
The Registrar of Imported Motor Vehicles may require modifications to the automobile before it is allowed on Canadian highways. For example, automobile instrument control screen must show in kilometers since the metric system is used in Canada. Other examples of required modifications are the installation of daytime running lights and child seat tethers.
Certain imported vehicles incur charges for special emissions tests or safety certification.
Canadian importers may also have to pay a car maker in the U.S. to provide a Letter of Recall.
Often commercial importers pay transportation charges to a freight forwarding company that can deliver a cargo of American-made cars. Shipping insurance is also needed.
Some casual importers drive the imported vehicle from the state of purchase to the Canadian customs office of entry. In those cases, the buyer will have to pay for a state-issued license or permit to drive the vehicle to Canada. These drivers will also have to buy binder insurance to cover the journey across the U.S.
Cheaper Prices But Greater Fees on Imported Vehicles
While it is easy to become excited about exchange-rate savings from a stronger Canadian dollar, potential importers should create a spreadsheet that tracks all costs to import a vehicle from America. This includes hidden taxes and fees.
But first, Canadians should check with the Registrar of Imported Vehicles to see whether the U.S.-made vehicle is eligible for import into Canada at all. In addition, CBSA officers are available to research specific issues.
Importers should also make sure the delivered vehicles are spotlessly clean when they arrive at a Canada Customs office. Otherwise, cost savings can be seriously eroded by Canadian Food Inspection Agency fees and hefty power-washing bills.
Sources: Canada Border Services Agency (CBSA) seminar Importing a Vehicle into Canada.
Daniel Workman - A senior business and finance writer who also does French translations, notably international trade and insurance materials.
Comments