Recently an importer of Canadian building products asked me for help with a customs issue he was having. This client had been buying Canadian post and beam log homes through another company, but his supplier went bankrupt a few years ago so he started importing directly. He never had to pay any duty as “house packages” are exempt under Japan’s tariff schedule. Unfortunately, each time he imported directly Japanese customs charged him duty claiming that they were not “house packages.” What changed? Was it his paperwork? He had no idea so he asked me to visit the customs office with him to get some answers.
Over the past few years the Japanese government has been promoting domestic lumber and during that time we have heard many complaints that customs were getting tougher on Canadian imports. For this reason, I went to the customs office fully expecting to face some protectionist motivations for this problem. However, it turned out that the customs officials were seemingly simply not clear on what constituted a “house package.”
The main problem was that they were only familiar with 2×4 packaged homes. Therefore, they were looking for walls (panelized or in component form), floor beams, and trusses in order to classify it as a packaged home. We went into great detail explaining post and beam construction and finally got them to understand that panelized walls and trusses were not needed for these homes. They now have to take this information to their superiors to get an official ruling so hopefully our client will soon be able to bring his homes in duty free.
What also interested me about this interpretation was that the customs officials were not at all concerned about finishing materials such as windows or doors being in the package. I have heard from clients in the past that other customs officials had denied “house package” status if such materials were not included. However, these officials went through the official definition with us (see the attached file), and the only criteria they cited was that all of the structural components necessary to make the house stand had to be included in the shipment. If finishing materials were included, they also enter duty free, but they were not a necessity. Should this interpretation hold, it will greatly simplify processing “house packages” in the future.
The other thing that this case made me realize was the importance of free trade agreements. The duty paid on lumber is 4.8% which no one wants to pay, but it is not necessarily a show stopper amount either. However, having to travel hundreds of kilometres and spending a day debating the definition of what you are importing with custom officials over and over is a serious headache for business people. Getting rid of these kinds of impediments to trade between Canada and Japan would be a tremendous benefit to our industry so I hope that the governments of each country keep discussing the possibility of such an agreement. In the meantime, please contact me if you are having or have had trouble with exporting house packages to Japan.