Tax & Trade Blog

The Canada Border Services Agency (CBSA) is responsible for reviewing imports to ensure compliance with Canada’s trade laws. In doing so, the CBSA sometimes focuses on what it deems “audit priority” areas. These are tariff classification codes where the agency believes that there is significant risk for misclassified imports under the Customs Tariff, which leads to the unlawful evasion of duties on those goods.

The CBSA recently released a new round of 2020 Trade Compliance Verifications, which dealt with a number of these priority areas.

In the report, the following “audit priority” areas had updated enforcement information, leading to several million dollars in fines and penalties for importers who misclassified their goods.

Exporters of goods from Canada may be surprised to receive a Notice of Detention from the Canada Border Services Agency (CBSA), indicating that their goods have been detained on the way out of the country.

Under section 101 of the Customs Act, goods that are about to be exported may be detained by a border services officer “until he is satisfied that the goods have been appropriately dealt with in accordance with this Act, and any other Act of Parliament that prohibits, controls or regulates the importation or exportation of goods, and any regulations made thereunder”. 

There are a number of possible reasons for a “detention”, ranging from errors on export forms to exports contary to Canadian export controls.

The Canada Border Services Agency’s (“CBSA”) Administrative Monetary Penalty System (AMPS) imposes monetary penalties (“AMPs”) for non-compliance with trade rules. AMPs levied are proportionate to the type, severity, and frequency of the infraction. According to the government, the goal of the system is to create a level playing field for Canadian businesses by ensuring that there is a cost for non-compliance with trade rules.

A (fairly) recent announcement from the CBSA has indicated that the AMPs associated with 22 different contraventions related to commercial trade will be increased, effective April 1, 2019.

With all of the concerns that businesses engaged in the import/export of products in the United States and Canada face (increased global competition, currency fluctuations and product quality), one of the least considered but most important involves the often confusing world of customs compliance.

While it is inevitable that errors or omissions may occur in customs compliance, errors can be expensive. To avoid customs assessments, and attendant interest and penalties (not to mention potential prosecution), constant vigilance of one's customs obligations is required.

Whenever a person imports commercial goods into Canada they are required to pay the GST at the border at the time of importation pursuant to Division III of Part IX of the Excise Tax Act (the “ETA”).   This GST rate is currently set at 5%. 

Those who are insufficiently familiar with Canada’s GST/HST system may find themselves treating this tax as a hard cost, or charging the GST/HST to Canadian customers and then keeping it as a form of reimbursement for the tax previously paid at the border.  Neither approach is correct.