Unsold, outdated or expired stock that will never be sold can still give you back the duty you paid on it.
The CBSA's Obsolete or Surplus Goods Program refunds the customs duty and excise tax paid on imported goods that are destroyed in Canada because they are obsolete or surplus.
The goods must be unused, undamaged and completely destroyed, and the destruction must be documented. Claims are filed on Form K32 within five years of the date the goods were released into Canada, one year longer than a normal drawback.
Customer returns, damaged goods and stock sent for recycling do not qualify.
Every brand ends up with stock it cannot sell. Last season's colourway. Packaging with an old logo. Supplements past their best-before date. Event merchandise after the event.
Usually that inventory is written off and destroyed, and the import duty paid on it is written off with it. It does not have to be. Canada lets importers recover the duty on qualifying goods without paying to ship worthless stock out of the country.
Sitting on dead stock?
Normally, drawback requires goods to leave Canada. Section 109 of the Customs Tariff creates an exception: imported goods that are obsolete or surplus can be destroyed in Canada instead, and the duty can still be refunded.
The CBSA explains the rules in Memorandum D7-2-3, Obsolete or Surplus Goods. The program exists so businesses do not have to pay freight to export valueless goods just to qualify for a refund.
The CBSA defines both terms in D7-2-3:
| Term | Meaning | Examples |
|---|---|---|
| Obsolete | No longer useful, outdated or superseded | Discontinued models, old packaging, expired medication or supplements |
| Surplus | More than what is needed, usually unsold excess | End-of-season apparel, event souvenirs, over-ordered stock |
The importer or owner decides that the goods are obsolete or surplus. You do not need CBSA approval for that judgment, but the goods must then meet every other condition.
Under section 109 of the Customs Tariff, all four must be met:
The CBSA requires the goods to be in exactly the same physical state from import to destruction. Retail and wholesale stock that was never sold to a consumer can qualify. Customer returns and rentals do not, because those goods have entered commerce.
Scratches, dents, rips, defects, fading or broken parts all count as damage. The CBSA's own example is a clothing store's customer-returned apparel with broken zippers or shrinkage: not eligible.
The program is designed for clean, unsold excess. Damaged stock needs a different route, if any.
The goods must be completely ruined so they cannot be an article of commerce. That applies to anything left over after destruction too. D7-2-3 gives incineration and sending goods to landfill as examples.
This catches many brands. Recycling, converting, reprocessing or transforming goods does not qualify, because the output is still something of value. The CBSA's example is melting jewellery into bullion. Textile recycling or donation programs will usually fall into the same category.
If anything of value is left in Canada, such as empty bottles or kegs after expired beer is destroyed, its value and related duty must be deducted from the claim.
Destruction must be supported by either:
The certificate must describe the goods in enough detail, including model, part or serial numbers where available, for the CBSA to match them to the import records. If you are unsure whether a method is acceptable, ask the CBSA before you destroy anything.
GST, PST and HST are not refunded under this program. Registered businesses usually recover import GST/HST through input tax credits instead.
A Vancouver apparel brand imports 2,000 winter jackets from China at a customs value of $40 each. At an 18% duty rate it pays $14,400 in duty.
The jackets do not sell. Two seasons later the style is discontinued and the brand decides to destroy the remaining stock, all still tagged and in original packaging.
The full $14,400 may be recoverable. If the brand had sent the jackets to a textile recycler instead, the claim would not qualify.
Example figures are simplified for illustration. Actual duty depends on tariff classification, origin and customs value.
Under D7-2-3, the claim needs:
Every document must describe the goods in detail, and the destroyed goods must match the original import records.
The claim must be filed within five years of the date the imported goods were released by the CBSA. That is a year longer than the four-year limit for export drawback, so older surplus stock can still qualify.
The same unsold goods may qualify either way. Exporting them, for example back to the supplier or to a liquidator abroad, is a same-condition export drawback claim with a four-year limit. Destroying them in Canada uses this program with a five-year limit.
| Destroy in Canada | Export | |
|---|---|---|
| Filing deadline | 5 years from release | 4 years from release |
| Freight cost | None | You pay to ship |
| Can you resell the goods? | No | Yes |
| Damaged or returned goods | Not eligible | Depends on the facts |
If a buyer abroad will pay something for the stock, exporting may beat destruction. If the goods are worthless, destruction usually wins.
Without a proper destruction certificate matched to import records, there is no claim.
Neither counts as destruction. Donated goods have entered commerce in Canada.
Returned goods have been used. Keep them out of the claim.
Damaged goods do not qualify. Sort them out before destruction.
Only customs duties and excise taxes are refundable here.
Before anything is destroyed, we check which stock qualifies, match it to the import entries, and tell you what the destruction certificate needs to say. Then we build and file the claim. There is no upfront cost. We are paid a percentage of what is recovered.
Yes, if the goods are obsolete or surplus, were never used in Canada, were not damaged, and are completely destroyed with proper documentation.
Five years from the date the goods were released by the CBSA.
No. The CBSA treats customer returns and rentals as used goods.
No. Recycling, conversion and reprocessing do not qualify, because the result is still an article of commerce.
Not necessarily. A Form E15 witnessed by a CBSA officer works, but third-party documentation with similar detail is also accepted.
No. GST, PST and HST are not refunded under the Obsolete or Surplus Goods Program.
Form K32, Drawback Claim, with the destruction certificate and import records.
It depends. Export keeps resale value but costs freight and has a four-year limit. Destruction costs nothing to ship and has a five-year limit.
This page provides general information and is not legal, tax or customs advice. Source: CBSA Memorandum D7-2-3, Obsolete or Surplus Goods. Eligibility depends on the facts of each transaction and the rules in effect at the time.
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