Tax & Trade Blog

The trade relationship between the United States (“US”) and Canada is facing renewed tensions as President Trump has indicated the US will impose a blanket 25 percent tariff on all Canadian goods on or soon after his inauguration on January 20, 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.

Since 1997, the Customs Act has imposed both mandatory payment and correction obligations on importers subject to Assessments.  In fact, if an importer wishes to challenge the Assessment, the only option is to first pay the assessed amount, and then request a review of the assessment – a system often referred to as “pay-to-play”.

As highlighted in the recent case of Skechers USA Canada, Inc. v. Canada Border Services Agency (2025 FCA 1) (“Skechers”), these obligations leave importers with limited options.  This means putting your best foot forward in a customs Compliance Verification is often the only practical way of dealing with a CBSA Assessment – often with the assistance of specialized legal advice.

Many travelers, including seasoned and sophisticated travelers, misunderstand the fundamental obligation to declare all goods being imported into Canada.

The most common misconception is often that “I’m within my exemption limits” and therefore “I don’t have to tell anybody what I’m bringing in”.

A recent case from the Federal Court of Appeal (“FCA”) demonstrates that this is far from the truth!

In 2024, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “FALC”) came into force, which imposed annual reporting obligations for certain entities.  While the 2024 reports were due last year, this is a recurring obligation with significant penalties for non-compliance.

Recently, the Canadian government issued its Report to Parliament summarizing the submissions received for the 2024 reporting cycle.  This Report serves as a reminder of the ongoing importance of timely compliance with the reporting obligations, with the next reporting deadline on May 31, 2025.

On January 1, 2025, Canada is set to make changes to its to unilateral tariff programs for imports under the Customs Tariff.  The changes include several beneficiary countries being graduated from the General Preferential Tariff (“GPT”) and Least Developed Country Tariff (“LDCT”) programs, and the introduction of a General Preferential Tariff Plus Program (“GPTP”) that will come into force at a later date.

Background

Canada’s customs system operates on the basis of preferential tariffs, in which countries are assigned a particular tariff treatment.  The tariff treatment assigned to a country is used (in conjunction with the HS Code) to determine the rate of duty imposed on a particular good imported into Canada from that country.