Tax & Trade Blog

In AG v. Bri-Chem Supply Ltd. et al. (2016 FCA 257), the Federal Court of Appeal (FCA) reproached the Canadian Border Services Agency (“CBSA”) for administrative practices that amounted to an abuse of process.

The Supreme Court of Canada rendered its first decision on the Customs Tariff in Canada v.Igloo Vikski Inc. (2016 SCC 38).  The decision provides guidance on applying the General Rules for the Interpretation of the Harmonized System (“General Rules”), particularly in the context of how the General Rules inform one another.

The recent Federal Court case Saad v CBSA (2016 FC 1382) is a cautionary tale in two respects.

In the first place, it is a reminder that travellers who are found not to have properly declared imported goods, risk having their vehicle seized by the Canadian Border Services Agency (“CBSA”), which has a broad range of powers under the Customs Act.

In Kashefi v Canada Border Services Agency (2016 FC 1204), the Federal Court suggested that travellers going to the United States with their prescription drugs should verify whether their medication is a controlled drug.  In the event that a traveller’s medication is a controlled drug, the traveller should be sure to keep the medication in its original pharmacy or hospital packaging, travel with less than a 30 day supply, and if entering Canada declare the medication to a customs officer.

The liberalization of Canada’s trade policies over the years has now lead to a situation where goods may often be capable of being imported to Canada on a duty free basis under Canada’s most favoured nation (MFN) tariff, without needing the benefits of Canada’s various preferential trade agreements (PTAs) like the NAFTA.

A problem arises, however, when after importing such goods on the basis of the MFN tariff, an importer discovers, or is assessed, on the basis that the original tariff classification was incorrect.   The problem specifically arises where, more than one year has passed from the original date of accounting, and the new “correct” tariff classification is duty-positive under MFN.  

In Canada Border Services Agency’s (CBSA) historic view of these situations, an importer is obliged to correct the tariff classification and treatment under s. 32.2(2) of the Customs Act, and pay the required MFN duties owing (with no application of the relevant PTA).  CBSA has historically denied application of PTA benefits in these situations on the basis that PTA refunds are usually limited to one year from accounting: see for example section 74(3)(b)(ii) of the Customs Act.

CBSA’s historic practice has been overturned by the Canadian International Trade Tribunal (CITT) in the recent decision in Bri-Chem Supply Ltd. v. CBSA ((October 2, 2015) AP-2014-017 (CITT)).