Tax & Trade Blog

While Canadian businesses may have a 30-day reprieve from the threatened Trump and Canadian retaliatory tariffs, businesses should take the opportunity now to put plans in place to minimize the fallout should tariffs be enacted.  One avenue businesses can pursue to mitigate the impact of the tariffs is duty drawback.   

While President Trump’s Executive Order removes the option for American businesses to claim duty drawback, Canada Border Services Agency (“CBSA”) has confirmed that duty drawback remains available for Canadian businesses engaged in the import and subsequent export of goods, even if retaliatory tariffs come into force.

On February 10, 2025, the Canadian International Trade Tribunal (the “CITT”) issued a notice that it was beginning an expiry review in respect of certain Hot-Rolled Carbon Steel Plate and high-strength low-alloy steel plate originating in or exported from Brazil, Denmark, Indonesia, Italy, Japan, and South Korea (the “Subject Goods”).  On February 11, 2025, the Canada Border Services Agency (the “CBSA”) similarly gave notice of the initiation of their parallel expiry review investigation (in respect of “Hot-rolled carbon steel plate 7”).

More details on the technical definition of the Subject Goods can be found here.

In an interesting customs case continuing the Canada Border Service Agency’s (“CBSA”) assault on toy replica firearms, the Federal Court of Appeal (“FCA”) pointed out that allegations of bias leveled at the CBSA and the Canadian International Trade Tribunal (“CITT”) during the appeal process are serious and come with a “correspondingly heavy burden on the party alleging bias to prove the allegations”.  This is not good news for taxpayers and importers who often come to us feeling that the CBSA or the Canada Revenue Agency (“CRA”) has pre-judged their particular appeals, with the end-result in mind.

While the Trump tariffs have so far singled out allegedly unfair treatment of the US by Canada when it comes to border protection and the fentanyl crisis, the question remains if focus might shift to Canada’s supply management system.

A recent announcement from Canada Border Services Agency (“CBSA”) indicated Canada’s dry wheat quota had already been surpassed on January 12, mere weeks into the year.  This raises questions about the fairness of the tariff rate quota (“TRQ”) system for anyone but the largest Canadian importers who have the means to take advantage of it. 

After 35 years of practice in Tax and Trade, one thing I am sure of is that there are no “magic” answers for dealing with administrative delay by the Canada Revenue Agency (“CRA”) or the Canada Border Services Agency (“CBSA”).  

A recent decision of the Canadian International Trade Tribunal (“CITT”) underscores this problem, and leaves taxpayers and importers in some potentially hard situations when faced by governmental inaction.

The trade relationship between the United States (“US”) and Canada received a brief period of reprieve with the recent 30-day postponement of President Trump’s blanket tariffs and Canada’s retaliatory countermeasures.  Despite this intermission, the US and Canada appear set to face off again with tariffs and other countermeasures, much like their counterparts on the ice in the nations face off. 

President Trump has shown a willingness to continue his strategy of cajoling Canada into trade concessions, as evidenced by his February 10, 2025, executive order imposing a 25% tariff on all steel and aluminum imports entering the US.  While there may be legitimate questions about the legality of such tariffs, in this dispute where the refs are off the ice the size of the US economy is a major advantage.

Canada’s packaging and labelling laws are important for anyone selling or importing products for retail, and for consumers wishing to make informed choices about their purchases.  Navigating these laws can be difficult as they are often found in several places.  In this Report we will provide some examples of Canada’s diverse packaging and labelling laws.  

The Rules and Where to Find Them

The basic rules regarding product packaging and labelling in Canada can be found in the Consumer Packaging and Labelling Act, mandating that the following be present:

For frequent travelers between Canada and the United States, the opportunity to save time at the border and make use of the NEXUS entry process is alluring.  Applying for NEXUS is a labour-intensive process, and after submitting some applicants may be surprised to find their applications rejected.  Not all hope is lost, however.  In this Report we review appeal rights, and why specialized assistance will usually be required, if results are to be maximized.  

Why was my NEXUS application denied?

The 30-day moratorium on Trump’s and Canadian retaliatory tariffs should give Canadian importers and exporters some breathing room.  But that breathing room ought to be put to good use considering current duty minimization opportunities, with the future possible implementation of these tariffs in mind.  “Unbundling” is one technique for dealing with punitive tariffs and is reviewed here.

What is Unbundling?

While we are generalizing here, unbundling involves lawfully stripping away non-dutiable components from otherwise dutiable goods.  When goods are imported into a country, the value of those goods needs to be determined so that the proper amount of duty can be applied.  Both Canada and the United States (“US”) are parties to the General Agreement on Tariffs and Trade (the “GATT”) and employ a version of the GATT Valuation Code.  Under that code, the “transaction value” method is the primary system, and focusses on the “price paid or payable” for the imported goods, plus certain additions and less certain deductions.

On January 13, 2025, the Canadian International Trade Tribunal (the “CITT”) announced its Finding in Inquiry NQ-2024-003 (the “Finding”) reporting that the dumping of certain hot-rolled deformed steel concrete reinforcing bar in straight lengths or coils, commonly known as rebar, originating in or exported from the Republic of Bulgaria (Bulgaria), the Kingdom of Thailand (Thailand), and the United Arab Emirates (UAE) (the “Subject Goods”) had caused injury to the domestic industry.

New Anti-Dumping Duties (“ADDs”) now apply to certain Subject Goods imported into Canada and released after January 13, 2025.

In a previous blog post, we discussed the high tax rates on Wine, Beer & Spirits products and the complex legal framework surrounding them.  In this 101 series, we will cover key topics, including Licensing Requirements, Audits and Assessments, and Enforcement Actions.  This first installment focuses on the Licensing Requirements for producers of Wine, Beer & Spirits products.  Licensing is often seen as the first step in compliance, and failure to meet these requirements can result in severe penalties, including fines, imprisonment, or both.

Wine Licence

Under subsection 62(1) of the Excise Act, 2001 (the “EA 2001”), a person is prohibited from producing or packaging wine without a Wine Licence, except in certain cases such as producing for personal use.  To obtain a licence, applicants must meet specific eligibility criteria, which vary depending on whether they are individuals, partnerships, or corporations.  A common requirement is that the applicant has to demonstrate sufficient financial resources to operate business in a responsible manner.

A couple of recent cases in the Federal Court of Appeal (“FCA”), which saw the taxpayer and importer, respectively, attempting to appeal earlier Court decisions, have emphasized that tax and trade litigation is a “one-shot deal”, where taxpayers (and importers on the trade side) are required to put their best foot forward in the lower Courts, and will be unlikely to get a second chance at making arguments before the FCA (or the lower Courts) if they do not do so.

Doostyar v. Canada

Doostyar v. Canada was a tax case, appealed to the FCA, in which the taxpayer’s position was that the Tax Court of Canada (“TCC”) erred by not accepting its additional submissions, post hearing.

As we have previously written here and here, a taxpayer’s debts can be imposed on their spouse or children through an assessment under section 160 of the Income Tax Act (“ITA”).  The Federal Court of Appeal has now drawn a line in the sand limiting the reach of such assessments with respect to the spouse of a tax debtor.

In Enns v. The King, 2025 FCA 14, the Court held that a survivor ceases to be the spouse of a deceased taxpayer for the purposes of section 160 of the ITA.  While the ruling is a win for survivors, it leaves open the question of how far the CRA’s assessment powers under section 160 may extend.

As we blogged on here, the threatened Trump and Canadian retaliatory tariffs stand to have a serious impact on Canadian businesses.  Beyond the anticipatory steps we described previously that can be taken now, businesses should begin seriously considering their options for avoiding or recovering any retaliatory tariffs.

In this Report, we will review some of those options.

Tariff Exemptions

In compelling circumstances, it may be possible for a business to obtain an exemption from the retaliatory tariffs.  Exemptions may be available for businesses that can demonstrate they will be unduly harmed by the tariffs.  For example, if it can be established there are no viable alternatives in the supply chain for inputs required for goods that a business produces, an exemption may be made. 

One of the more difficult things I have run into in my 35+ years of practice in customs, trade, and indirect tax, is navigating through extremely difficult to understand appeals processes, buried in multiple similar and parallel sections in the Customs Act (“Act”).

A recent case makes me think that I am not alone in this world (!), with the Canadian International Trade Tribunal (“CITT”) chastising the Canada Border Service Agency (“CBSA”) for misunderstanding and potentially misapplying the customs appeal processes.

The Canada Border Services Agency (“CBSA”) resets its “audit priority areas” twice per year.  Essentially, the CBSA designates certain tariff classification codes as priority areas for customs verifications (i.e., “audits”), based on the program areas which the CBSA believes pose significant risk for important non-compliance in tariff classification, valuation, and origin of goods.

The CBSA has released its January 2025 Trade Compliance Verification priorities, setting the stage for the next six (6) months.    As is often the case, most of the focus is on tariff classification.

While Canada was given a short reprieve yesterday from the tariffs threatened by US President, Donald J. Trump, President Trump appears to have doubled-down signalling that these 25% tariffs will be coming by February 1.  If this is to be believed, the days of US and Canadian weighted average tariffs in the 2.2-3.4% range are over, and Canadian businesses need to begin preparing for the challenges these sorts of significant tariffs will bring – including the likelihood of Canadian retaliatory measures, which we reported on here. 

In this Report will review basic preparation steps for “right now”.

The trade relationship between the United States (“US”) and Canada is facing renewed tensions as President Trump has reaffirmed that the US will impose a blanket 25 percent tariff on all Canadian goods, and is aiming to do this as soon as February 1, 2025.

In response, Canadian government officials have signaled Canada will respond with retaliatory tariffs and other possible countermeasures such as export taxes.  Consequently, it is important to understand how retaliatory import tariffs and export taxes have worked in the past, and how they might work in the future.