During the training courses that I present, I am always surprised by the number of businesses that import and do not know what is a B3 declaration. In fact, businesses often choose a customs broker to complete their declarations, without knowing the meaning of the fields in these forms. In my opinion, it is essential that a business that imports has at least a basic understanding of the B3. In the following article, I would like to give you an overview of the meaning of the fields in this form, as well as the most frequent mistakes made.
What is the purpose of a B3 declaration?
Before I get to that, let me explain the purpose of a B3 declaration. This form is a “tax” declaration that Canada Customs requires from any importer to complete, to report what they are importing. It determines the amount of duties and taxes (and other) that an importer must pay to Canada Customs according to the import transaction (the country of origin of the goods, the nature of the product, the country of export, etc.).
Understanding the B3
As I mentioned earlier, it is essential to know the meaning of the fields in the B3 declaration. Let me explain a few of them:
Field 1: Refers to the importer who is legally responsible for importing. Here, a distinction must be made between importer and commercial liability (Incoterms). Therefore, it is not the name of the company receiving the goods (consignee) that must appear in this field, but rather the importer (purchaser), unless the consignee is also the purchaser.
This field must also contain the importer number (XXXXXXXXXRMXXXX). In general, the importer number is identical to the 9 digits of the GST number, except for the letters that indicate “RM” instead of “RT.” It should also be noted that the digits after “RM” are generally “0001,” unless a business has multiple branches. In this case, it could have a different number for each of its branches, such as “XXXXXXXXXRM0001,” for the head office, “XXXXXXXXXRM0002” for branch number 1, “XXXXXXXXXRM0003” for branch number 2 and so on. Finally, it should also be noted that the importer number must be activated, as should the GST number. For example, if a business has a GST number, it will need to activate its importer number before importing.
Field 11: Refers to the entity that sells the goods subject to importation. We have to distinguish between the entity that sells the goods and the entity that ships the goods. In fact, the entity that sells the goods is not necessarily the one that ships them.
Field 12: Refers to the country of origin of the goods subject to importation. Be careful not to confuse the country of origin with the country of shipment (field 13). Also, for each country of origin, an additional B3 page is required. Therefore, if you are importing different items that come from different countries, multiple B3 pages will be required with different headers for each country. The same principle applies if you are importing items in different currencies; you will also need to use different pages with different headers for the different currencies. In other words, all items listed under the header with different information (different countries of origin, different currencies, different vendors) will need to be placed on a new page with a personalized header.
Field 14: Refers to the tariff treatment. This number corresponds to the preferential agreement, which includes the country that imports the goods and the country of origin of the goods. Most imported products have code 02 (most favoured nation) which is the old GATT.
Field 16: Refers to the direct shipment date of the goods to Canada. It should not be confused with the invoice date of the goods. The exchange rate used by customs is determined by that date, which will determine the calculation of customs duties on the goods.
The fields above are fields that are part of the form’s header. The header determines the calculation for each line of the B3 declaration. Each line should represent a type of item that is imported (from the same country). Let’s continue with the meaning of the fields in each line:
Field 22: Refers to the description of the item. Customs will often look at the HS code rather than the description. It is important to emphasize that each item has a code assigned to it and that is found in the customs tariff. It is essential to use the correct code in order to determine the correct rate of duty.
Field 28: Refers to the tariff code applied to the item being imported. In fact, the customs tariff contains 99 chapters. Each chapter mentions the tariff code to be applied for the item being imported. For certain types of items, chapter 98 or 99 may be applied. These are applied in exceptional cases and allow items used for a specific purpose to be duty-free. For example, imported carpet that is intended to be placed in an aircraft could be duty-free under Chapter 99, Appendices 9967 or 9968.
Field 29: Refers to the unit of measure for the item being imported. The unit of measure is determined by the customs tariff. Note that the vast majority of the information required in this field is used by Statistics Canada.
Field 31: Refers to the value for duty code. The first digit of the code refers to the relationship between the purchaser (importer) and the vendor, which may influence the price of the item being imported. If it is “1”, that means the purchaser and vendor are not related, so they are two separate businesses. If it is “2”, that means the purchaser and vendor are related. For example, the vendor and purchaser could be related by joint shares in each company. The second digit of the code refers to how the price of the item was determined by the vendor and purchaser. For example, it could indicate that there was a discount on the price of the item.
Field 35: Refers to the rate of GST. The majority of items entering Canada will be subject to 5% GST, except for exceptions such as food. For each exception, there is a code.
Field 36: Refers to the value of the item in foreign currency, which is indicated in field 17.
Field 37: Refers to the value of the item in Canadian currency. This is the value that customs uses to calculate duties and taxes.
Field 38: Refers to the amount of customs duties to be disbursed according to the customs tariffs, which determines the rate of duty on the type of item being imported. To understand how customs duties are calculated for a commercial import transaction, you can read our article entitled “How are customs fees calculated .“
Field 42: Refers to the amount of taxes (GST) payable. To calculate this, you have to add up the value of the item in Canadian dollars and the customs duties, and then multiply that by the GST rate.
At the end of the declaration, we finally find the amounts:
Field 47: Refers to the sum of all fields 38 (for each line).
Field 50: Refers to the sum of all fields 42 (for each line).
Field 51: Refers to the total amount payable to customs.
As I mentioned earlier, I did not explain all the fields that are in the B3. Some fields would merit special attention depending on the types of items being imported. For more information about the fields in the B3, you can consult the: Memorandum D17-1-10.
What are the most common mistakes made when filling out a B3?
In my experience as a trainer and consultant, I have often seen mistakes that could have, with a basic understanding, been avoided when completing the B3s. Here are some common mistakes:
Field 1: The importer’s name in field 1 is incorrect. For example, a company has several factories and the name of the factory on the B3 is incorrect.
Field 1: The importer number is incorrect. For example, another branch number is indicated instead of the correct branch (“XXXXXXXXXRM0002” instead of “XXXXXXXXXRM0001”) or the GST number has changed and has never been applied.
Field 11: The vendor name is incorrect. The name of an entity with a similar name to the vendor is listed.
Field 12: The country of origin is copied from another B3, without checking whether the items on the B3 lines are from the same country.
Field 16: The shipment date is incorrect. Remember that the exchange rate is determined by the departure date. This may have an impact on the amount of duties payable.
Field 17: The currency code is incorrect. This is an error that often occurs when the currency is not properly identified on the commercial invoice.
Field 27: The HS code on one of the B3 lines is misclassified or a transcription error has been made.
Field 31: The first digit of the value for duty code is set to 1 by default. There is no problem if the purchaser and vendor are not related. However, if the two parties are related, the code should start with the digit “2.”
Field 35: The GST rate code is set to 5 by default. However, if the items being imported are exempt from GST, the code should be, for example, 66.
Field 50: On a multi-line entry, a line could have an unwarranted exemption code. It is an error to copy a product, even if you believe you are paying the total GST.
Ask for help from specialists
Completing a B3 correctly requires a general understanding of an import transaction and a lot of practice. If you have any doubts about how to complete this form, contact our specialists who will be able to assist you with how to proceed. You can reach our specialists by email at serviceconseil@w2c.ca or call them at 514-368-2637 option 2. In addition to our consultation services, you should know that we also offer training courses to help you better understand how to complete a B3 so that you avoid making mistakes that could lead to costly problems.
