Tax & Trade Blog

On June 2, 2023, Canada Border Services Agency (“CBSA”) released a notice that it was starting a scope proceeding in respect of carbon steel fasteners originating in or exported from China or Taiwan. The proceeding was initiated by a potential importer, and will confirm whether CAMO Edge Screws are subject to the existing Canadian International Trade Tribunal (“CITT”) anti-dumping Order. The final decision and Statement of Reasons should be available by September 29, 2023.

On May 27, 2023, the Canada Border Services Agency (“CBSA”) released long-anticipated draft amendments to the Value for Duty Regulations under the Customs Act.

The proposed changes may have major implications for how most goods are imported to Canada are valued and change how the terms “sold for export to Canada” and “purchaser in Canada” are defined – two bedrock definitions under the “Transaction Value” method.

These changes will likely have significant financial consequences for many importers, and for non-resident importers (“NRIs”) specifically!

The Consultation Period on these draft regulations closes June 26, 2023.

On May 15, 2023, the Canadian International Trade Tribunal (“CITT”) issued a notice that it was beginning an Expiry Review in respect of dry wheat-based pasta originating in or exported from the Republic of Turkey (“Turkey”). 

Anyone wanting to participate in the expiry review must file a Notice of Participation with the CITT by May 30, 2023!

We frequently act for Clients whose goods or vehicles have been seized by Canada Border Services Agency (“CBSA”).   More often that one would think, these seizures involve goods or conveyances (e.g., tractor-trailers, utility vehicles, transport trailers) that are owned by a person other than the importer (e.g., lease goods, borrowed goods, goods subject to a PPSA security).

Where this happens, the true owner is a third party to the seizure but must often take specific steps to protect its legal interest in the seized property.   If nothing is done, the owner can often find the goods subject to forfeit and sold or disposed of by CBSA!

One of the most difficult aspects of dealing with anti-dumping measures can be figuring out whether goods are caught by an active measure or not. Because appeals in this area are pay-to-play, getting these issues right up front is extremely important!

Luckily, the Special Import Measures Act (“SIMA”) provides a formal process – called a “scope proceeding” – which will determine whether a good is caught by an Order (as well as Findings or Undertakings)!

While the technical aspects of a scope proceeding are complicated, based on historical jurisprudence in this area, many Clients prefer the certainty of a scope proceeding than simply importing on speculation – especially where the potential costs of CBSA taking a different view are measured in one, two and three times of goods sold!

We are no strangers to helping individuals who find themselves subject to a Canada Border Services Agency (“CBSA”) seizure and all the consequences that come with that – including NEXUS seizures and revocation. But when it comes to bringing plant or animals (or their derivatives – e.g., food) into Canada, travellers can inadvertently commit a violation which is very punitive and difficult to defend.

Specifically, the Agriculture and Agri-Food Administrative Monetary Penalties Act (“AAAMPA”) imposes violations (“AAAMPs”) which leave no room for reasonableness or diligence. Even with the hurdles involved, however, appealing an AAAMP might be worthwhile (and successful) – particularly given that it can lead to continual secondary screening and a loss of NEXUS eligibility!

The right to make a customs or Special Import Measures Act (“SIMA”) appeal is very different than the right to make similar income tax or GST appeals. Unlike income tax or GST, appeals for customs and SIMA cases can ONLY be made once full payment of ALL amounts assessed has been made to the government!

This unfair situation is presenting problems for Canadian commercial importers who want to fight their Canada Border Services Agency (“CBSA”) customs and SIMA assessments but lack the financial ability to do so.   The issue is especially severe in the case of SIMA assessments, where the amounts being levied by CBSA can sometimes exceed two or three times the total value of the imported goods themselves – and add up to 10 or 20 times the profit margin that the importer expected to earn from these import transactions.

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

CBSA has now released its January 2023 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!

Since the inception of the GST/HST in 1991, the Canada Revenue Agency (“CRA”) has taken what we consider to be a strict approach to the documentary/information requirements under section 169(4) of the Excise Tax Act (“ETA”), which must be met in order to claim input tax credits (“ITCs” and the “ITC Information Requirements”). This approach has likely lead to millions if not billions of ITC denials, leaving GST/HST registrants unable to recover GST/HST paid on their business inputs, and leaving the costs of their goods and services artificially too high – because of this unrecoverable GST/HST left embedded in the system.

In what we regard as potentially the most important case in decades, the Tax Court of Canada’s (“TCC”) decision in CFI Funding Trust (2022 TCC 60) underscores that CRA’s strict approach is overly technical and incorrect!

Effective July 1, 2022, tobacco retail dealers in British Columbia (“BC”) must register to collect and remit provincial sales tax (“PST”).

The tobacco industry is no stranger to high taxes and complicated regulatory schemes – but BC appears made the situation even worse, by making provincial sales tax (“PST”) apply on top of its pre-existing stand-alone tobacco tax!

The Canadian tobacco industry is among the most highly and intensely regulated industries in the country – albeit largely policed by Provincial Governments. In Ontario, for example, regulation crosses all levels of the production, manufacturing and distribution process, starting with the actual farming of tobacco and ending with the final sales to the ultimate consumers of the products (i.e., smoking for their own consumption).

While many in the tobacco industry will be aware of the Ontario Ministry of Finance’s (“MOF”) involvement in assessing and auditing for tax at the wholesale distribution stage or monitoring tax compliance among Ontario retailers and convenience stores, the MOF’s audit activities actually start much sooner, and include audits and verification of tobacco farming activities.

Fresh off of its announcement of a major plastic ban (see our prior blog here), the Canadian federal government is now also moving forward with a plan to heavily regulate the plastics that do remain in the Canadian economy, by imposing a mandatory federal “plastics registry”.

The Liberal Government plan is currently in the consultation stage, which means that producers, importers, distributors and retailers have until October 7, 2022 to provide input.

Carbon pricing in Canada can be confusing for both new entrants to the market and established players. This comes from Canada’s patchwork system of rules which vary across the country. Adding to the complexity is the fact that the federal Greenhouse Gas Pollution Pricing Act (“GGPPA”) only applies (as a “backstop”) where provincial/territorial legislation is not strict enough (in the opinion of the federal government)!

US businesses with Canadian carbon activities need to be aware of multiple different rules – federal (under the GGPPA, which applies in the so-called “listed provinces” outlined below) and provincial/territorial (applicable to the particular province in which they are operating).

Figuring out where one has to register is just the first step!

As we have previously discussed, Canada has one of the most protectionist agricultural product sectors in the world, putting import restrictions and incredibly high tariffs on basic groceries like cheese, eggs and poultry – and leading to continuing disputes with countries like the US and New Zealand over this approach.

Even if Canada is forced to change under pressure from its trade partners, tariff rate quotas (“TRQs”) will still remain a fact of life for importers – so it is best to know when and how to apply, and what to expect!

My Nexus Card got Seized!

What are my chances of winning a Nexus Appeal? And when can I reapply?

These are the two most common questions that we get from traveler clients calling or writing us after having their Nexus Cards seized by either the Canada Border Services Agency (“CBSA”) or U.S. Customs and Border Protection (“CBP”) – usually for minor infractions, under the apparently “zero-tolerance” approach that both agencies seem to be applying these days.

The second question usually comes after clients confirm that they can appeal, but that the prospects of winning are not completely certain and legal costs will have to be incurred before the appeal can be properly made.

While we reviewed the basics of the administrative appeals required earlier (i.e., one for Nexus Revocation, and a related appeal for the alleged underlying Customs infraction), here we will look at these two more fundamental questions.

Canada’s rules on vaping products have been undergoing substantial change over the last little while, starting with the 2018 enactment of the Tobacco and Vaping Products Act (“TVPA”). While the TVPA set up a new regulatory framework, the rules have seemingly grown in complexity since, with far-reaching implications for manufacturers, importers, retailers and any other business involved in the vaping industry.

Seizures of cash have been increasing in Canada, usually at major airports, where Canada Border Service Agency (CBSA) agents are tasked with policing and enforcing Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Money Laundering Act” or the “MLA” for short).

Unfortunately, more often than not, the cash seems to be seized from unsuspecting travellers with good intentions, who are not involved in criminal activities but are simply unaware of their legal obligation to declare the proper amounts of cash they are traveling with when crossing international borders.

In the world of “natural health products” (“NHPs”), “NFR” is all the rage.   It is commonly believed that the NFR exception allows virtually any NHP to be imported to Canada, provided each importation is transacted in no more than a 90-day supply.

The key words here are “commonly believed”.   You might also say “commonly misunderstood” – and here is why.

It seems that the only thing hotter than inflation these days is CRA’s auditing and assessments in missing traders, carousel schemes and shams. Affected industries so far include telecom, gold and precious metals, diamonds and precious gems – and even include mom-and-pop start-ups in the home-made muffins industry.   Left unchallenged, these assessments can invariably lead to corporate bankruptcy and insolvency and, more problematically, can involve personal assessments of directors, spouses and children!

The primary customs valuation method across the Western world is “transaction value”, which is a way of valuing goods coming across international borders. Transaction value is used by both the US Customs and Border Protection Agency (CBP) and the Canada Border Services Agency (CBSA) to value imported goods entering their respective territories.