Since 1997, the Customs Act has imposed both mandatory payment and correction obligations on importers subject to Assessments.  In fact, if an importer wishes to challenge the Assessment, the only option is to first pay the assessed amount, and then request a review of the assessment – a system often referred to as “pay-to-play”.

As highlighted in the recent case of Skechers USA Canada, Inc. v. Canada Border Services Agency (2025 FCA 1) (“Skechers”), these obligations leave importers with limited options.  This means putting your best foot forward in a customs Compliance Verification is often the only practical way of dealing with a CBSA Assessment – often with the assistance of specialized legal advice.

The Skechers Case

In late 2018, the Canada Border Services Agency (the “CBSA”) conducted a Compliance Verification of declarations that Skechers USA Canada, Inc. (“Skechers Canada”) made in 2017.  In 2020, the CBSA issued a Final Report concluding that commissions paid by Skechers Canada to acquire imported goods should have been included in the value for duty.

Under section 32.2 of the Customs Act, Skechers Canada was required to file corrections to its declarations for the prior four years (i.e., 2017-2020).  Skechers Canada sought an exemption from this requirement, but the CBSA denied the request.

Skechers Canada then filed judicial review applications in the Federal Court and the Federal Court of Appeal, challenging the reasonableness of the CBSA’s decision. However, both courts dismissed the applications, holding that the CBSA did not have the discretion to grant such exemption, and that Skechers Canada did not follow the statutory appeal process under the Customs Act.

Commentary

The outcome of the Skechers case is not surprising to practitioners in customs and trade.  However, it highlights the frustration importers often face when dealing with CBSA Assessments and the statutory requirements for appealing them.

First, unlike GST/HST or income tax audits, the CBSA does not pinpoint every transaction requiring correction.  Instead, as seen in Skechers, the CBSA typically audits a sample of transactions, identifies issues, and requires importers to correct those issues for the entire four-year period.  One may see this as an outsourcing of audit functions from the CBSA to the importers, placing a disproportional burden on importers in terms of time and efforts.

Second, to follow the statutory appeal process, importers must pay all duties and interest, and then seek an administrative review or judicial appeal.  For many importers, this may potentially create a significant barrier to justice, as not all have the financial resources to satisfy the CBSA’s Assessments before they can challenge the decision.

Takeaways

Unfortunately for importers, the Customs Act contains mandatory obligations once an Assessment has been issued.  These include payment of duties and interest before any appeal can proceed, and corrections addressing issues identified by the CBSA for the prior four-year period.

These obligations make it critical to act strategically to put the best foot forward when facing a CBSA Assessment.  This will generally require expert advice from practitioners in the area.

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