On January 18, 2024, the Canada Border Services Agency (“CBSA”) issue a Notice of Conclusion in the ongoing Expiry Review of Carbon Steel Welded Pipe 2 (“CSWP-2”) exported from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (“Chinese Taipei”), India, Oman, South Korea, Thailand and the UAE (“Subject Goods”). The CBSA determined that the expiry of the Canadian International Trade Tribunal’s (“CITT”) order dated October 15, 2018, in Expiry ReviewRR‑2017‑005, is likely to result in the continuation or resumption of (i) dumping of Subject Goods (from all the above-noted countries) and (ii) subsidizing of Subject Goods (exported from India). A detailed Statement of Reasons for this determination was released on February 02, 2024.
Tax & Trade Blog
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GST/HST Sham Assessments
As a tax lawyer assisting clients in defending themselves against the all-powerful CRA (and its equally powerful ally, the Department of Justice – Canada’s largest and best-equipped law firm), I welcome any judicial decisions that help to right that
On January 22, 2024, the CBSA issued a Notice of Retroactive Assessments in respect of certain Corrosion-Resistant Steel Sheet (“COR-2”) goods imported into Canada from Türkiye (formerly Turkey) and Vietnam.
Canadian importers of these COR-2 goods may soon find themselves on the receiving end of these retroactive assessments in respect of imports into Canda between December 2021 and November 2022!
A recent Federal Court of Appeal (“FCA“) decision in Pillon v. Canada (2024 FCA 24) highlights the difficulties that Tax Debtors will face if trying to avoid GST and income tax debts. Both the Excise Tax Act (“ETA”) and the Income Tax Act (“ITA”) have extremely powerful collections tools allowing the Canada Revenue Agency (“CRA”) to assess certain non-arm’s length persons (think spouses, children, relatives, close friends and associates) that have been transferred a Tax Debtor’s property for less than fair market value (“FMV”). These rules can even apply to corporate shareholders receiving dividends from delinquent corporations.
The new year brings an important new reporting obligation likely affecting many Canadian and some US-based Direct Selling businesses – and sadly, the in-house Law Department and other Compliance Professionals they employ!
New Canadian Forced Labour Legislation / Reporting Requirements
Canada’s Bill S-211, Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “FCLA” and “Forced Labour”), came into force on January 1, 2024. These new Forced Labour rules are broadly aimed at eradicating Forced Labour from Canadian supply chains, by establishing annual reporting requirements, banning related imports and increasing non-compliance penalties.
The new year brings an important new reporting obligation likely affecting most Canadian and many US-based Oil, Gas and Petroleum businesses – and sadly, the in-house Customs & Trade Professionals they employ!
New Canadian Forced Labour Legislation / Reporting Requirements
Canada’s Bill S-211, Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “FCLA” and “Forced Labour”), came into force on January 1, 2024. These new Forced Labour rules are broadly aimed at eradicating Forced Labour from Canadian supply chains, by establishing annual reporting requirements, banning related imports and increasing non-compliance penalties.
The recent decision of the Tax Court of Canada (“TCC”) in Refind Environment Inc. v. The King (2024 TCC 2) is a poignant reminder of the importance of filing deadlines.
In Refind, the TCC dismissed an application for an extension of time to file a Notice of Objection against assessments under the Excise Tax Act (“ETA”) because the Registrant was one (1) day late in filing their application for an extension of time to the Minister of National Revenue (the “Minister”)!
Canada’s furniture industry was seemingly upturned in late 2020 with the Canada Border Services Agency (“CBSA”) investigation and then its Notice of Preliminary Determination that certain upholstered domestic seating (“UDS”) being imported to Canada from China and Vietnam was being dumped. Almost overnight, it seemed, the cost of Canadian leather sofas and recliners skyrocketed (some under dumping and subsidy duties set as high as 188%) – with CBSA’s imposition of provisional and then final anti-dumping duties, levied under Canada’s Special Import Measures Act (“SIMA”), being to blame. (Canadian industry might suggest NOT “to blame” BUT to “protect”, Canadian competitiveness that is).
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 :
- Detection and prevention of the sale of unsafe products;
- Cooperation with Health Canada;
- Raising of product safety awareness amongst sellers; and
- Empowerment of consumers on product safety issues.
The CITT has announced an Expiry Review of its finding made on February 15th, 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: