How much Canadian duty and surtax comes back on goods exported to the US or Mexico?

What does the CUSMA limit on drawback actually say?

Canada refunds duty on imported goods that leave the country again: the drawback program in section 113 of the Customs Tariff, claimed on Form K32 within four years of release. The general program, its forms and its interplay with surtax remission are covered in duties relief and drawback on past Canadian entries. This page is about one exception to it, the one that decides most claims on goods sold to American and Mexican customers.

Article 2.5 of CUSMA stops each party from refunding customs duties on a good imported into its territory, on condition that it or a good made from it is exported to another party, "in an amount that exceeds the lesser of the total amount of customs duties paid or owed on the good on importation into its territory and the total amount of customs duties paid to another Party on the good that has been subsequently exported". Canada enacted that as section 96 of the Customs Tariff: a drawback of customs duties on goods exported to the United States or Mexico "may not exceed the lesser of" the Canadian duties and "the amount of customs duties paid to the country … to which the imported goods were subsequently exported."

The policy is plain: the free trade area should not let a Canadian producer use foreign inputs duty-free and then sell the finished product into the US or Mexico duty-free too. Where the US or Mexico collects duty on the finished good, Canada may refund up to that amount. Where they collect nothing, Canada refunds nothing.

Which goods are caught, and which are not?

Section 95(6) of the Customs Tariff and Memorandum D7-4-3 list what escapes the cap. The audit question for each duty-paid line is which column it sits in.

Same condition is wider than "untouched". D7-4-3 accepts minor operations that do not materially alter the goods: dilution with water, cleaning and rust removal, applying a preservative, "trimming, filing, slitting, or cutting", packing and repackaging, and "testing, marking, labeling, sorting, or grading". A distributor that cuts imported steel sheet to length and ships it to a US customer may still be in the same-condition column. Where the answer is not obvious, the memorandum describes a Same Condition Ruling, requested through the CARM Client Portal.

Origin means CUSMA origin. The exception for originating goods uses the CUSMA rules of origin in Chapter 4 of the agreement, proved the way Memorandum D11-4-2 describes. It is not the marking test that decides whether Canada's US surtax applies. A US-made input that paid Canadian surtax and also meets the CUSMA rule of origin is outside the cap, and its surtax can come back in full on goods made from it and exported to the US.

What counts as customs duty on each side?

The cap compares two numbers, so it matters what goes into each.

On the Canadian side, the surtax counts. The Customs Tariff's own definition of customs duty, in section 2, limits it to the duty under section 20 "except for the purposes of Part 3", the Part that holds the drawback and relief rules, so section 96 is not confined to the tariff-schedule duty. CUSMA Article 1.5 in Chapter 1 defines customs duty to include "a duty or charge of any kind imposed on or in connection with the importation of a good, and any surtax or surcharge imposed in connection with such importation". The CBSA's surtax notices take the same line: Customs Notice 26-23, on the United States Surtax Order (2026), says the drawback and duties relief programs are available for the surtax "subject to CUSMA" and that goods of CUSMA origin are not subject to the CUSMA limits. A non-originating input that paid both customs duty and surtax adds both to the Canadian side of the comparison.

SIMA duty is out entirely. The same definition excludes antidumping and countervailing duty from customs duty, and Article 2.5(2) separately forbids refunding them on condition of export. D7-4-3 says: "For goods subject to the CUSMA restrictions, SIMA duties may not be claimed via drawback." SIMA duty deferred under the Duties Relief Program on such goods must be paid within 60 days of export.

On the US or Mexican side, the CBSA wants the foreign entry. The comparison figure is "the total amount of customs duties paid on the exported good in the CUSMA country", taken from that country's customs documentation and converted to Canadian dollars. Article 1.5 applies the same definition to every party: a duty or charge imposed in connection with importation, including any surtax or surcharge, but not antidumping or countervailing duty or a fee for services. D7-4-3 does not address US surcharge lines on the entry summary, such as Section 232 duties, line by line. List each US duty line separately in the evidence, so the CBSA can see what was counted, and confirm the treatment of surcharge lines with the CBSA before relying on them.

GST is never part of it. D7-4-3 says Article 2.5 "does not affect Goods and Services Tax (GST) relief, GST deferral, or GST Input Tax Credit refund processes", and Memorandum D7-4-2 says GST/HST "cannot be refunded by drawback". GST registrants recover import GST as an input tax credit; see GST on imports after a CAD correction.

Why can a US preference claim wipe out the Canadian drawback?

Because the cap compares money actually paid. If the finished product qualifies for USMCA at the US border and the US customer pays no duty on it, the second number in the comparison is zero and the drawback on the non-originating Canadian inputs is zero too.

That creates a trade-off a manufacturer should price before shipping, not after:

• Claim USMCA at the US border: the customer pays no US duty on the product, and the Canadian duty and surtax on non-originating inputs stay paid.
• Do not claim it, or the product does not qualify: the customer pays US duty, and Canada refunds up to that amount.

Where the US also charges a surcharge that a USMCA claim does not remove, the US duty paid may not be zero even on a qualifying product, and if the CBSA accepts that line as customs duty paid, the cap leaves room for a drawback. Ask the customer for the entry summary before deciding which column a shipment falls in.

How does the Duties Relief Program differ for these exports?

Under the Duties Relief Program the duty is never paid at import, so the CUSMA rule works in reverse: section 95(1) of the Customs Tariff makes the exporter report the export and pay the relieved customs duties within 60 days, reduced under subsection 95(5) by the customs duties paid to the US or Mexico if satisfactory evidence arrives within that time. D7-4-3's first example: CAD 9.00 deferred in Canada, CAD 6.00 paid in the US, CAD 3.00 payable within 60 days of export. Interest on unpaid customs duties starts on the 61st day after export; on SIMA duty it starts the day after export. A licence holder should therefore have the US entry data flowing back within weeks, not at year end, and submit the five data elements at least quarterly, as D7-4-3 requires.

A worked line: one input, three destinations

The figures are illustrative and round. An Ontario manufacturer imported a non-originating machined component in April 2026 with a value for duty of CAD 100,000. The CAD line shows CAD 4,000 of customs duty, CAD 25,000 of surtax under one of Canada's surtax orders, and GST of 5% on CAD 129,000, which is CAD 6,450. The component goes into machines, sold as follows by October 2026.

Germany. Outside CUSMA, so D7-4-3 places no limit: 40% × (CAD 4,000 + CAD 25,000) = CAD 11,600.

Customer A. The machines entered the US free under USMCA. The lesser of CAD 8,700 and CAD 0 is zero.

Customer B. The customer's entry summaries show duty equal to CAD 5,200 at the exchange rate of the US entry date, which is the rate D7-4-3 tells claimants to use. The lesser of CAD 8,700 and CAD 5,200 is CAD 5,200. The claim carries the five data elements for each US entry.

Totals. CAD 29,000 of duty and surtax paid; CAD 16,800 drawn back; CAD 12,200 stays with the manufacturer: CAD 8,700 on customer A's share and CAD 3,500 lost to the cap on customer B's share. The CAD 6,450 of GST is not in the claim at all; the manufacturer recovered it as an input tax credit.

Two variations change the answer completely:

• If the component had been exported to customer B in the same condition, for example cleaned, tested and repacked as a spare part, the cap would not apply and the drawback on that share would be the full CAD 8,700.
• If the component had originated in the US under CUSMA rules, section 95(6)(a) would take it out of the cap for both US customers, and all CAD 29,000 would be claimable, as long as no surtax remission had been granted on it, since remission and drawback cannot both relieve the same surtax.

How do you build the claim from your own records?

1. Pull the duty-paid lines from the last four years with value for duty, customs duty, surtax, SIMA duty and release date. Drop lines already relieved by a remission code or a Duties Relief licence.
2. Mark each line's CUSMA status. Originating under CUSMA, non-originating, or unknown. Unknown is non-originating until the supplier proves otherwise.
3. Trace each line to its exports through bills of materials, production and sales records, and split by destination: CUSMA country or not, same condition or processed.
4. For capped exports, get the customer's entry data. Entry number, entry date, tariff number, rate and duty paid, per US or Mexican entry. List each duty line separately so the CBSA can see what was counted.
5. Compute the lesser of the two duties per export, in Canadian dollars at the foreign entry date's exchange rate, and back out exempt inputs first, as D7-4-3's examples do.
6. Check remission before drawback on every surtax line: a remission order may return the whole surtax regardless of destination, and the two cannot both be granted.
7. File the oldest releases first, on Form K32 in CARM, with waivers where another party could also claim. Interest on the drawback runs from the 91st day after the CBSA receives the application.

TariffSense reads CAD/B3 lines and broker accounting exports, totals customs duty, surtax and SIMA duty per line, and, with export and production records and the customer's entry data, computes the lesser-of-two-duties figure for each US or Mexican export and the full drawback for the rest, so the claim and its five data elements come out of the same table. Filing stays with you or your broker. The post-entry audit page shows what goes in and what comes back, and the checks on surtax lines themselves are in why your CAD shows the wrong surtax.

What should you do next on your own entries?

List your exports to the US and Mexico from the last four years and ask each customer for the duty paid on entry. For every shipment where the customer paid nothing, the Canadian duty and surtax on non-originating inputs are not coming back, so stop forecasting a drawback on them. For shipments in the same condition, or with CUSMA-originating inputs, claim in full. Confirm the treatment of the US duty lines and the claim itself with a licensed customs broker or trade counsel before filing; the US side of drawback on goods going the other way is covered in duty drawback on past entries, and the Canadian audit in auditing CAD/B3 entries after accounting.