Tax & Trade Blog

Based on recent inquiries, it appears that the Canada Border Services Agency (the “CBSA”) is currently focusing on verifying whether importers are using the correct tariff classifications when reporting importations of various spices and seasoning products.

Importers of spices and seasoning products – and their foreign producers – should take any inquiries from CBSA seriously!

The Government of Canada’s website cautions returning travellers to “Be sure . . . declare everything”.  However, problems can arise, and the Canada Border Security Agency (“CBSA”) could seize your goods like jewellery.

Having one’s jewellery, especially rings and necklaces of sentimental or significant value, seized can be an incredibly stressful situation. Our previous blog considered this subject, and we will provide you with further insight into the appeal process.

If a person intends to carry CAD $10,000 or more in Cash over Canada’s border (either entering or exiting Canada), the person carrying the cash must declare the amount being carried to Canadian Border Services Agency (“CBSA”). If a CBSA officer determines that a traveller is carrying undeclared cash and suspects that it may be proceeds of a crime, the CBSA may seized the cash and hold it until the matter is proven otherwise. A recent Federal Court decision in Evans v Canada (Public Safety and Emergency Preparedness), 2022 FC 1516 (“Evans”) serves notice that while there are appeal mechanisms available, it can be extremely difficult to overturn these seizures.

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.

The Customs Act requires corrections of errors in import declarations – such as a tariff classification, country of origin, or value for duty.  Each correction requires the filing of a form B2 adjustment request, which can be an onerous task when multiple corrections are required. The CBSA has an administrative practice that streamlines the procedure for authorized importers by allowing them to file a single blanket adjustment request - a single form with an attached spreadsheet - to process multiple corrections with one form.  However, the CITT decision in Worldpac Canada (AP-2014-021) shows that administrative practice does not have the force of law and a taxpayer’s reliance thereon involves risk. 

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)).

In Skechers v. CBSA (2015 FCA 58), the Federal Court of Appeal (“FCA”) considered a Canadian International Trade Tribunal (“CITT”) decision which applied a broad interpretation of “price paid or payable” for Customs Act valuation purposes, resulting in a significantly higher value for duty for the imported footwear at issue in the case, and with far-reaching implications for all Canadian goods, especially apparel and footwear items.

Although importers have regularly been subject to paying additional customs duties on their imports as a result of subsequent upwards price adjustments, importers had been limited in their ability to obtain a refund or reduction in duties where subsequent downward price adjustments were made.  However, a recent change in Canada Border Services Agency (CBSA) policy in light of a 2014 Canadian International Trade Tribunal (CITT) decision now provides importers with an expanded ability to claim reductions in duty in the context of downward price adjustments.

January 1, 2015 was a big day for changes in the General Preferential Tariff (the "GPT").  On that day, Canada removed 72 countries from the list of nations that benefited from the GPT.  Most notable among the list of countries removed from the GPT was China, an exporting superpower, but other significant countries on the list include Brazil, India, Russia, South Africa, and Turkey.  The full list is provided at the bottom of this page.

Like many areas of law, in customs valuation there are cases that represent so-called high and low water marks – cases that represent the extremes of possible outcomes, given a set of facts. Every once in a while, a case comes along that moves these marks around – often surprising practitioners. The recent case of Skechers USA Canada Inc. v. CBSA is one of those cases, and the decision of the Canadian International Trade Tribunal (the “CITT”) has caught the attention of many practitioners.