Tax & Trade Blog

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.