Tax & Trade Blog

On August 21, 2023, the Canadian International Trade Tribunal (“CITT”) announced an Expiry Review of its finding made on October 15, 2018, in Expiry Review RR-2017-005, continuing its finding made on December 11, 2012, in Inquiry No. NQ-2012-003 in respect of Carbon Steel Welded Pipe exported from Chinese Taipei, the Republic of India, the Sultanate of Oman, the Republic of Korea, the Kingdom of Thailand and the United Arab Emirates.

On January 23, 2024, the CITT released a Revised Notice of Expiry Review RR-2023-003, updating certain elements of the Expiry Review Schedule.  Relevant Questionnaires have also been posted.

The Canada Border Services Agency (“CBSA”) resets its “audit priority areas” twice per year. Essentially, the CBSA designates certain products as priority areas for customs verifications (i.e., “audits”) based on the program areas that the CBSA believes pose a significant risk for import non-compliance in terms of tariff classification, valuation, and/or origin of goods.

The CBSA has now released its January 2024 Trade Compliance Verification priorities, setting the stage for the next six (6) months. While there are no new audit priorities in this round, the CBSA has announced its intention to engage in new rounds of verifications on a number of historic issues, and updated its statistics on existing verifications. As is often the case, most of the focus is on tariff classification!

The Canadian International Trade Tribunal (“CITT”) has announced an Expiry Review in respect of the dumping of corrosion-resistant flat-rolled steel sheet products of carbon steel from China, Chinese Taipei, India and the Republic of Korea.

What is an Expiry Review

Expiry Reviews are conducted jointly by the Canada Border Services Agency (“CBSA”) and the CITT to review prior Anti-Dumping Duty (“ADD”) or Countervailing Duty (“CVD”) orders made by the CITT (“Orders”) under Special Import Measures Act (“SIMA”). These Expiry Reviews generally occur every five years following the original Orders or subsequent renewal.

On January 22, 2024, the Canada Border Services Agency (“CBSA”) issued a notice of conclusion of expedited review in respect of certain hollow structural sections (“HSS”) exported to Canada by Histeel Co. Ltd. (“Histeel”) from South Korea.

What is an Expedited Review?

Under subsection 13.2(1) of the Special Import Measures Act (“SIMA”), an exporter or producer may request the CBSA conduct an expedited review where:

There seems to have been an uptick in Canada Border Services Agency audits concerning the tariff classification of gloves, carrying costly consequences to potential importers not based on what their product is, but how it is used by their customers!

This is a function of the wonderful world of tariff classification, some of the complexities of which we tackled in a previous blog, here.  

The chief issue is whether imported gloves will be used “with protective suits in a noxious atmosphere” or whether they will be used in other circumstances/places which CBSA does not consider a “noxious atmosphere” (e.g. nail salons, restaurants, etc.). 

A great new year’s resolution for Directors of a Canadian private corporations is to brush up on GST/HST and income tax compliance!  The reason is that where a corporation incurs a tax debt for GST, HST or income tax source withholdings, the directors of those corporations can be held personally liable.  For GST/HST purposes, this potential liability encompasses virtually all the net tax obligations of the corporation!  

A recent case demonstrates the high standard directors need to uphold, even when imposed with incredibly difficult situations in which the government has played a hand.

On September 28, 2023, Health Canada launched the Canadian Product Safety Pledge (the “Safety Pledge”) – a voluntary compliance initiative aimed at increasing product safety with respect to consumer products and cosmetics available to Canadians online. 

The Safety Pledge consists of 14 voluntary commitments concerning protective and corrective actions that Health Canada has indicated are grouped into four categories :

1. Detection and prevention of the sale of unsafe products;
2. Cooperation with Health Canada;
3. Raising of product safety awareness amongst sellers; and
4. Empowerment of consumers on product safety issues.

The CITT has announced an Expiry Review of its finding made on February 15^th, 2019 (NQ-2018-003) in respect of Carbon Steel Welded Pipe from Pakistan, the Philippines, Türkiye and Vietnam.

What is an Expiry Review

Expiry reviews are conducted jointly by the Canada Border Services Agency (“CBSA”) and the Canadian International Trade Tribunal (“CITT”) to review prior Anti-Dumping Duty (“ADD”) or Countervailing Duty (“CVD”) orders made by the CITT (“Orders”) under Special Import Measures Act (“SIMA”). They generally occur every five years following the original Order or subsequent renewal.

Canada Border Services Agency (“CBSA”) resets its “audit priority areas” twice per year – designating certain tariff classification codes as priority areas for customs verifications.

Priorities are based on CBSA’s work in certain industries or on CBSA’s view of “significant risk” importations from a tariff classification, valuation, and origin compliance perspective.

With the January 2024 audit priorities around the corner, it is a good time to review the outcomes from the July 2023 update.

Tariff Classification Priorities

As Russia’s invasion of Ukraine nears the two-year mark, now is an appropriate time to take stock of the variety of trade sanction measures which have been put in place throughout this year.

Background

Importers will recall the government’s swift decision to remove “Most-Favoured-Nation” (“MFN”) tariff status from both Russia and Belarus in March 2022.

If there was such a thing as a “10-Alarm” fire, CRA’s public release of GST Interpretation RITS 202403 would seem to fit that bill.

In this April 2023 Interpretation – issued only a few weeks ago – CRA takes the view that Employers with pension funds invested in an insurer’s segregated funds, are NOT eligible to claim ITCs for the GST/HST payable on the investment management fees (“IM Fees”) paid directly out of those funds.

On one level of analysis, CRA has done an about-face and reversed a prior 2012 Ruling in this area (which seemed to have addressed the same situation).  While CRA may disagree with that statement, this does appear to be a potentially significant “reinterpretation”.

When our Firm sees a spike in Ontario Employer Health Tax (“EHT”) files, we know that something is up.  And this may not bode well for employers that have traditionally viewed Ontario’s relatively low-rate EHT as an unimportant tax, delegating its compliance to payroll providers, staff members, and others.

Background

Ontario’s EHT is an employer liability payroll tax imposed on total Ontario remuneration paid to current and former employees.  With the  employer’s “exemption amount” (recently raised to $1,000,000 for most “eligible employers” until 2029), the effective rate is exceedingly low.  For example, a payroll of $2,000,000 would give rise to less than $20,000 in annual EHT.  Not really enough to keep anyone up at night and definitely not enough to build a fabulous law practice out of!

One of the more notable differences between Income Tax and GST/HST is that for GST/HST purposes partnerships are expressly defined to be “persons” – separate from the partners of the partnership.  Most provincial sales tax statues take the same approach and define partnerships to be separate legal persons.  However, this is not the case in British Columbia (“BC”), which is the sole Canadian jurisdiction that does not treat partnerships as persons for Provincial Sales Tax (“PST”) purposes.

This could change as the BC Ministry of Finance (the “Ministry”) has released a Consultation Paper seeking feedback on proposed legislative changes to bring BC in line with the rest of Canada.  Subject to public support, the Ministry has identified four legislative or regulatory changes which would be required:

When one feels mistreated at the border by Canada Border Services Agency (“CBSA”) officers, can one really do anything about it? The answer is “yes”, because the CBSA can be held indirectly liable for negligence as well as Charter breaches (through its officers). 

As a recent case demonstrates, the road to judgement will usually be long and difficult and perhaps reserved for only the most egregious of cases, or where the matter is one of principle.  Extreme facts will generally be required to make out a negligence claim against government departments like the CBSA, and inappropriately short limitations periods exist for bringing these suits.

Export Controls Overview

Canada’s “export control laws” under the Import and Export Permits Act place “controls” on the export of certain sensitive goods, technology and data. This ranges from basic goods of economic interest, to military, nuclear and strategic goods (famously described as “sharp and pointy things that go bang”). Underlying technology, information and know-how are also controlled as are “dual-use” goods. 

Goods subject to export control are set out in Canada’s Export Control List (ECL), which requires experience to apply. This is magnified by the complexity of the fact that:  (1) all U.S.- origin goods and technology are controlled (because of Canada’s bilateral commitments), and (2) all goods are controlled when sent to countries on the Area Control List (ACL).

On November 14, 2023, the Canadian International Trade Tribunal (“CITT”) issued a notice that it was beginning an expiry review in respect of cold-rolled steel originating in or exported from the People’s Republic of China (“China”), the Republic of Korea (“South Korea”), and the Socialist Republic of Vietnam (“Vietnam”). On November 15^th CBSA similarly gave notice of the initiation of their parallel expiry review investigation.

The CITT more specifically described the Subject Goods as:

As we blogged about here, experienced indirect tax practitioners will know to always check section 154 of the Excise Tax Act (“ETA”) when dealing with provincial taxes and to think about whether the that provincial tax is excluded from the “consideration” for the supply. If the provincial tax is not excluded, it means that GST will be applied on top of the provincial tax — in effect meaning there will be tax (GST) on the tax (provincial sales tax).

The most recent issue of the CRA Excise and GST/HST News explained how the GST applies on top of British Columbia’s Major Events Municipal and Regional District Tax ( “Major Events Tax” or “MET”) and serves as another example of this principle in practice.

A common theme of our direct selling blogs is that direct selling businesses should pay close attention to the wording of their key documents (compensation plans, contracts, and policies and procedures, etc.) to ensure that plan participants are properly characterized as independent contractors and not as employees.

While not in a direct selling context, a recent decision at the Tax Court of Canada serves as a cautionary tale for businesses that fail to examine the details of their documents – their workers may be characterized contrary to their intentions!

On October 27, 2023, the Canada Border Services Agency (“CBSA”) issued a notice of conclusion of Expedited Review in respect of certain Chinese upholstered domestic seating (“UDS”) from Eterno Co. Ltd. (“Eterno”) and Zhe Jiang Shengli Furniture Co., Ltd. (“Shengli”) (the “Exporters”). 

Background

The Canadian International Trade Tribunal (the “CITT”) concluded an Investigation into certain UDS from China and Vietnam, and issued a Finding on September 2, 2021 that the dumping and subsidizing of said UDS had caused injury to the domestic (Canadian) industry, resulting in the imposition of anti-dumping and countervailing duties subject to exclusions and inclusions specifically identified by CBSA. 

All taxpayers under audit should be aware of both the scope and limitations of Canada Revenue Agency’s audit powers, as well as the consequence of failing to respond to a CRA Auditor’s valid request for documents or information.

The Federal Cout decisions in Canada v. Money Stop Ltd. (2013 FC 133), and Canada v. Money Stop Ltd. (2013 FC 684) are poignant reminders that ignoring the demands of a CRA auditor may land the Director(s) of the Corporation in prison!