By Jeff Fraser
I’m going to begin by acknowledging that I may be dating myself when I ask this, but … remember the rolodex; the handy wheel of business cards that adorned the desk of every businessperson? How about alphanumeric texting through flip phones, or CD collections? Remember those?
They are all items that have been rendered obsolete by new technology. But what if tomorrow your smartphone suddenly ceased to exist? What if touchscreens were outlawed or a scarcity of the requisite rare-earth materials needed to make semiconductors made consumer tech products prohibitively expensive? What would you do?
Chances are you’d go back to older ways of doing things – back to your CD collection, back to the rolodex. It would be challenging, cumbersome and inconvenient, but it would be necessary.
In the context of trade, many importers are finding themselves in precisely this position as governments pursue protectionist agendas that put up barriers to free trade. For two generations, importers had numerous means of reducing their duty, but rarely ever made use of them because free trade agreements like NAFTA or the USMCA rendered these mechanisms unnecessary. They were the rolodexes of the trading system.
But in today’s environment of high tariffs what’s old is new again. The challenge is, these mechanisms have been unused for so long that many importers don’t even know they exist. But they do and using them can save businesses a lot of money. More on that shortly but first let’s talk about the new ways of saving on duty in Canada that you may have never heard about.
Receiving remission
When the Canadian government announced it was imposing surtaxes in response to U.S. tariffs, it was headline news. Every media organization in the country reported on it. But on April 17, 2025, the government announced significant relief for those impacted by the surtaxes. Not for everyone, mind you, but for a sizeable group of importers. One could be forgiven for not knowing about it. There was no media buzz; no headline news about it. This is deep-in-the-weeds, esoteric customs stuff. But it matters.
For those still not in the know, the remission order allows for importers to apply for exemption on Canada’s surtaxes on U.S.-origin goods if they fall within certain industries, such as pharma, health and wellness, manufacturing, food production and food labelling. There are specific conditions, which, if met, can help importers of these goods save significantly on duties associated with Canada’s new surtaxes. This is particularly critical for businesses north of the 49th parallel, because unlike their counterparts in Washington, officials in Ottawa have not made USMCA-qualifying goods eligible for surtax exemption. But the remission is only available on goods imported until October, so importers should take advantage as quickly as they can.
Lesser of two
When the U.S. government announced exemptions for Canada-origin and Mexico-origin goods that qualified for USMCA, many interpreted it to mean that the vast majority of import would be exempt. Not so. In fact, only about 38% of imports into the U.S. from Canada are traded under the USMCA. That’s an important figure, because those businesses that aren’t qualifying their imports under the trade deal are not only missing out on the duty exemption for any goods they may import as non-resident importers into the U.S.; they’re also missing out on taking advantage of a provision tucked away in the aforementioned remission order.
Here’s how it works. Normally, Canadian importers who import components of a product into Canada to be manufactured into a product that is eventually re-exported to the U.S. can file for duty drawback on the duties paid entering only one of the two countries. The “lesser of two” rule stipulates the drawback can only be applied to the lesser of the two duty outlays paid in association with a product. Since UMSCA goods are exempt from duty when they enter the U.S. under the current tariff regime, the goods re-exported to the U.S. would face zero duties, which would be the lesser of the two. That means the importer would be ineligible for duty drawback.
The remission order, however, stipulates that U.S.-origin goods subject to Canadian surtaxes are “not subject to the limitations of CUSMA (USMCA) and the “lesser of two duties” determination does not apply.” That means importers who qualify for duty drawback under the “lesser of two” rule can recover duties previously paid due to the recently imposed surtaxes.
These are precisely the sort of esoteric considerations that importers haven’t had to worry about for some time, but are finding increasingly useful.
Related parties
This is another oldie but goodie that’s been lost but not forgotten. Corporations that operate multiple companies that buy and sell goods from one another often miss out on potential duty savings because of lax inter-company policies that disqualify them.
Duties are assessed based on stated valuation of goods. Related companies often fall into the trap of having poor documentation to verify to the Canada Border Services Agency that their inter-company relationship did not influence the value of the good (i.e., that the purchaser wasn’t given an unusually low price for the good because it is from a related company). In these instances, companies often put themselves in a position where valuation is determined by a third party and often unfavorably to the purchasing company in Canada. Carefully documenting inter-company transactions through standardized (and ideally automated) processes can prevent such situations.
While many believed that NAFTA and later the USMCA rendered these sorts of considerations unnecessary, they’re mistaken. Accurate valuation and associated documentation was always integral to customs compliance; however, many importers simply maintained less-than-adequate compliance practices while using the trade deal. From their perspective, the risk was only having to pay the standard tariff rate, which was generally low for most products (think singe-digit percentiles. But in today’s environment where surtaxes abound, the importance of valuation—particularly between companies—has been given renewed priority. Hopefully, not just for the short term.
Freight deduction
One of the significant cost inputs for any product is the cost associated with the logistics of bringing the various product components together for the manufacturing process. This is particularly true for products involving large components, such as cars and airplanes, but not exclusively so.
To help offset their duty outlay, importers can deduct the cost of freight from the valuation of their imported goods. Much like in the related parties example above, many companies fail to take advantage of this opportunity because of poor documentation, rendering them unable to prove the definitive cost of freight (estimates aren’t permissible). Many don’t use this duty-reducing mechanism because free trade renders it unnecessary to do so.
Not just a stopgap
Many will read about the sorts of mechanisms listed above as a means of mitigating the impact of duties while surtaxes are in place. And the mechanisms will do just that. The trouble is, the turmoil of recent months has proven that we cannot take free trade for granted. The USMCA will likely be renegotiated once again in 2026 and there’s no guarantee it will live on past that negotiation. Even if it does, there’s no telling when the surge of protectionism may come about.
The mechanisms noted above are tied to good data hygiene. They require companies to be diligent in their documentation and record keeping and scrupulous about how they share that information and those documents between related and unrelated buyers and sellers.
Many of the clients we support often struggle with these same processes and find themselves challenged in claiming otherwise easily attainable duty drawback. If there’s any lesson to be learned from the tumult of the past few months, it’s that we’ve progressed in a circle over the last 30-plus years that has led us right back to the rolodex.
Jeff Fraser is a director of consulting in Livingston’s Global Trade Consulting group. He develops customized compliance programs for importers and provides expert guidance on identifying duty savings and recovery programs. He also has considerable experience building cross-border processes specific to the needs of U.S.-based non-resident importers.