Tax & Trade Blog

On Friday, March 10, 2023, the Canadian government announced it is banning the import of certain aluminium and steel products from Russia. This comes as a sanction against Russia for its actions in Ukraine, and is coordinated with the US’s 200% tariff on aluminum products that came into effect the same day.

Canada has bilateral free trade agreements with a number of other nations (e.g., between the US and Mexico under the USMCA, between Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam under the CPTPP, and with most of the European Union under the CETA).

Canada’s next target for free trade appears to be India, and Global Affairs indicates that negotiations toward an Early Progress Trade Agreement have been progressing rapidly!

On October 29, 2018, Canada became fifth country to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the “CPTPP”), joining Mexico (June 28, 2018), Japan (July 6, 2018), Singapore (July 19, 2018), and New Zealand (October 25, 2018).

Canada’s ratification meant that only one other country needed to ratify the agreement to trigger implementation of the CPTPP. Fortunately, Canada did not have to wait very long because on October 30, 2018 Australia became the sixth country to ratify the CPTTP, triggering a 60-day countdown to the implementation of the agreement on December 30, 2018.

With US President Donald Trump hinting that he may withdraw his country from the North American Free Trade Agreement (“NAFTA”), many are starting to consider what the effects that such a withdrawal would have on goods and services crossing North American borders.

What has not been widely reported is the expected effect on business immigration (e.g., US and/or Mexican nationals seeking temporary entry into Canada for business or investment purposes).

Chapter 16 of NAFTA currently allows citizens of the US and Mexico (i.e. who are not Canadian residents) to enter Canada as a “business visitor” for temporary business or investment purposes, and stay in Canada for up to six months – all without a “work permit”. To qualify under these business visitor provisions, a traveller must be entering Canada for the purposes of engaging in qualifying activities (which include conferences, trade-shows, conventions, and business meetings for taking orders or negotiating contracts for goods or services for certain enterprises).  (For a complete list of permissible activities, click here).

So what happens if NAFTA disappears overnight?

Some other options would still be available for business travellers needing to enter Canada temporarily.

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)).

An undisclosed agency exists if an agent enters into a contract with a third party on behalf of a principal, but does not reveal to the third party either the identity of the principal or the fact that the agent is acting on behalf of any principal.