Tax & Trade Blog

The right to make a customs or Special Import Measures Act (“SIMA”) appeal is very different than the right to make similar income tax or GST appeals. Unlike income tax or GST, appeals for customs and SIMA cases can ONLY be made once full payment of ALL amounts assessed has been made to the government!

This unfair situation is presenting problems for Canadian commercial importers who want to fight their Canada Border Services Agency (“CBSA”) customs and SIMA assessments but lack the financial ability to do so.   The issue is especially severe in the case of SIMA assessments, where the amounts being levied by CBSA can sometimes exceed two or three times the total value of the imported goods themselves – and add up to 10 or 20 times the profit margin that the importer expected to earn from these import transactions.

Canada is often viewed as a natural extension of the American direct selling ecosystem:  it has a common dominant language, similar culture, convenient land border, and a market of over 38 million people!

While there are many similarities, there are still unique legal and regulatory features that direct selling businesses operating in Canada must be aware of and adapt to — all of which can be easily avoided with the right planning, structuring or advice.  This includes the appropriate “Canadianization” of plan documents and overall business strategies. 

In the third of a 5-part series, we review one of the major risk areas facing the Canadian direct selling industry:

Understanding CBSA Verifications

The January 2020 Canadian International Trade Tribunal (“CITT”) decision in Landmark Trade Services v. President of the CBSA (Case No. AP-2019-002) was a welcome relief for customs brokers because the CITT held that Landmark (acting as a customs broker for what can loosely be described as a freight-forwarding situation) was not liable as the "importer" of the goods, despite the fact the import documentation described Landmark as the importer and purchaser. Accordingly Landmark would not be on the hook for the additional duty owing from the incorrect tariff classifications used on those import documents.   

Over a year later, Landmark's victory has resulted in headaches for businesses that use similar freight-forwarding structures, as the CBSA looks to re-assess them and hold them liable for additional duty on the basis they were the owners of the goods at the time of import. To understand why, one must understand what Landmark was doing.

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.

The Canada Border Services Agency ("CBSA") recently issued Customs Notice N-13-011 ... well maybe not so recently ... in May ... but it sometimes takes that long to keep up to date with these pressing announcements :). 

The changes relate to CBSA”) administration of customs Administrative Monetary Penalties(“AMPs”) which may apply to the most basic of errors by Canada’s commercial importers, and can in some instances be as high as $500,000.  These penalties are often imposed in connection with CBSA customs verifications -- short terms of "audit" and are aimed at securing compliance with customs legislation.

CBSA Valuation Verifications Target Apparel Imports

The Canada Border Services Agency ("CBSA") publishes a list of its active trade compliance verification priorities twice a year, outlining the industries or goods that it is prioritizing for compliance verification. This year the Canadian Apparel industry has been targeted, and has been issued a spate of Trade Compliance Notification Letters. The five most critical things that Apparel importers need to know before responding to these Notification letters are as follows.