Tax & Trade Blog

The World Customs Organization (“WCO”) revises its Nomenclature of Harmonized Commodity Description and Coding System used for the uniform classification of goods traded internationally (“Harmonized System” or “HS Codes”), every five years. This is done to adapt to technological advancements and emerging global changes. As this nomenclature forms the basis for the Tariff Schedules of around 211 WCO member countries worldwide (including US and Canada), these changes are important!

Canada is expected to implement these changes in 2022, and importers will need to re-evaluate their tariff classification, declaration, and HS Coding systems to ensure conformity with the new Customs Tariff.

The Canadian dairy industry is one of the most protected industries in the world, which while good news for Canadian diary producers is decidedly bad news for Canadian importers looking to import and distribute specialty dairy products like fine or specialty cheeses. These importers will face requirements for both import licenses and quota allocation, with the latter usually difficult if not impossible to obtain for first time entrants!

Regulatory Background

As indicated, Canadian importers must have access to a Tariff Rate Quota (“TRQ”) in order to import supply-managed goods that fall within Canada’s Import Control List (“ICL”) at “preferential tariff” rates.

One of the least understood areas of CBSA administrative policy are the rules surrounding the operation and licensing of customs warehouses. These warehouses (of which there are several types) allow goods brought into Canada to be stored within the country while deferring the payment of applicable duties and taxes in respect of their import until they are ‘released’. The rules in this area are administratively complex, and expert legal advice should be considered for any business looking to use or operate a customs warehouse.

In Budget 2021 the Government of Canada proposed a “luxury tax” effective January 1, 2022 on sales of certain luxury vehicles – cars/trucks, aircraft, and boats - whose selling price exceed a $100,000 threshold for cars/trucks and aircraft, and a $250,000 threshold for boats. The proposed tax would be the lesser of 20% of the value above the threshold, or 10% of the full value of the luxury vehicle. At the time the government said the luxury tax is expected to raise $604 million over 5 years.

On June 4, 2021, the Government of Canada published an Order Amending the Export Control List (the “Order”), changing the regulatory landscape for businesses that deal with controlled goods and technologies in Canada. While a seemingly minor update — set to come into force after July 23^rd, 2021 — this change actually has very far-reaching implications for firms looking to stay in compliance with these important rules!