Tax & Trade Blog

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CHAT GPT, HAVE I COMMITTED CUSTOMS FRAUD?

UPTICK IN FRADULENT UNDER-VALUATION WITH NEW TARIFF ENVIRONMENT

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Not since the 1980s and ‘90s has our specialized Customs, Trade & Indirect Tax Firm seen such an uptick in clients with significant under-valuation issues with the Canada Border Services Agency (“CBSA”).

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NOT ALL DESIGN COSTS COUNT FOR DUTIES!

IMPORTER “WIN” AS CITT EXCLUDES CERTAIN DESIGN COSTS FROM VALUE FOR DUTY

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For businesses importing goods into Canada, the transaction value method (“TVM”) is the most commonly applicable method for determining the value for duty (“VFD”) under the Customs Act. However, for Canadian subsidiaries of foreign businesses, disputes often arise with the Canada Border Services Agency (“CBSA”) over VFD-related issues such as (1) the relevant “sale for export”, (2) purchaser in Canada status, and (3) inclusion of various design costs.

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ANTI-DUMPING – WHO IS THE EXPORTER?

CITT DECISION PROVIDES CLARIFICATION IN TRANSACTIONS WITH INTERMEDIARIES

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Anti-dumping duties (“ADD”) under the Special Import Measures Act (“SIMA”) generally apply where the normal value of targeted imported goods exceeds their export price. However, determining what ADDs are payable on particular goods may first require identifying who the “exporter” of the goods actually is in the circumstances since that will affect the normal value/export price.

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STEEL REMISSION OPPORTUNITIES

AVAILABLE, BUT IF NOT AUTOMATIC, IT WILL BE A REAL WAITING GAME!

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We have written about Canada’s many different surtaxes on steel goods here and here , and Canada’s extension of some of these steel surtaxes (including horizontal tariff relief) here .

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EXPIRY REVIEW & EXCLUSIONS: REFINED SUGAR

ANTI-DUMPING REVIEW IS AN OPPORTUNITY TO REQUEST PRODUCT EXCLUSIONS

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On July 2, 2026, the Canadian International Trade Tribunal (“CITT”) announced the initiation of an expiry review (“Review”) on the dumping and subsidizing of refined sugar from the United States, Denmark, Germany, the Netherlands, and the United Kingdom. On July 3, 2026, the Canada Border Services Agency (“CBSA”) similarly gave notice of the initiation of its parallel expiry review investigation.

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SETTLER’S EFFECT RULES WHEN MOVING TO CANADA

PERSONAL AND HOUSEHOLD GOODS CAN BE IMPORTED DUTY-FREE WHEN IMMIGRATING

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Canada allows newcomers to Canada to import personal belongings duty-free under the "Settler's Effects" tariff classification, HS Code No. 9807.00.00 (the “Settler’s Effects HS Code”). However, the Canada Border Services Agency (“CBSA”) maintains strict policies with respect to using the Settler’s Effects HS Code.

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SURETY BONDS CAUGHT IN INSURANCE TAX NET

SUPERIOR COURT CONFIRMS SURETY BONDS SUBJECT TO CORPORATE INSURANCE TAX

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Commercial surety bonds ("Surety Bonds") are a vital but frequently misunderstood staple of international trade. Importers and customs brokers rely on Surety Bonds to secure various financial obligations with the Canada Border Services Agency ("CBSA"), including Release Prior to Payment ("RPP") bonds under CARM, bonded warehouses, carrier agreements, and customs appeal bonds.

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CBSA TARGETING CARPETS AND AREA RUGS?

VERIFICATION AUDITS FOCUSING ON CLASSIFICATION UNDER CHAPTER 57

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A good part of our Tax and Trade practice involves advising Clients in the Textiles industry on matters involving Canadian customs duties and taxation on imported goods.

Recently, we have seen an increase in Canada Border Services Agency (“CBSA”) verification audits and assessments involving carpets and area rugs. One focal point seems to be the application of Tariff Chapter 57 of the Customs Tariff (“CT”), which contains many of the Harmonized System (“HS”) Classification codes for carpets and similar textile floor coverings. Improper tariff classification can lead to significant duty assessments and penalties, even for importers who have “always used” a particular tariff code without issue.

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CUSTOMS VALUATION & RELATED PARTY PRICING

IT’S THE 1990’S ALL OVER AGAIN! CUSTOMS VALUATION RULES REIGN

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The new tariff environment in 2025 and 2026 has put a premium on getting the “big three” declarations correct when it comes to customs importations. These are: tariff classification, origin, and value for duty.

In this Customs 101 Series Report, we review the basics of customs valuation where goods are being bought from, and imported between, related parties.

On February 10, 2025, the Canadian International Trade Tribunal (the “CITT”) issued a notice that it was beginning an expiry review in respect of certain Hot-Rolled Carbon Steel Plate and high-strength low-alloy steel plate originating in or exported from Brazil, Denmark, Indonesia, Italy, Japan, and South Korea (the “Subject Goods”).  On February 11, 2025, the Canada Border Services Agency (the “CBSA”) similarly gave notice of the initiation of their parallel expiry review investigation (in respect of “Hot-rolled carbon steel plate 7”).

More details on the technical definition of the Subject Goods can be found here.

The CBSA has historically requested password information from travelers in order to search their smartphones, personal computers and tablets, on the basis that these devices are searchable like all other “goods” coming into Canada.

The Ontario Court of Appeal in The King v. Pike (2024 ONCA 608) has determined, however, that the CBSA’s routine searches of such electronic devices is contrary to the Charter of Rights and Freedoms (the “Charter”) and is unconstitutional!

On March 27, 2024, the Canada Border Services Agency ("CBSA") received a representation from Tenaris Canada ("Tenaris"), requesting a reinvestigation of normal values and subsidy amounts for oil country tubular goods ("OCTG1") and seamless casing ("SC") exported from China. Under the CBSA’s policy, other interested persons have the opportunity to respond to this representation by submitting comments to the CBSA.

Canada Border Services Agency (“CBSA”) has announced that the final iteration of its recent revamping of Canada’s import systems will arrive May 13, 2024.

Direct Sellers importing their products into Canada for further distribution or sale to their salesforce or customers (including with the assistance of a customs broker) – will be particularly concerned with these changes!

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!

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!

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.). 

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

When one feels mistreated at the border by Canada Border Services Agency (“CBSA”) officers, can one really do anything about it? The answer is “yes”, because the CBSA can be held indirectly liable for negligence as well as Charter breaches (through its officers). 

As a recent case demonstrates, the road to judgement will usually be long and difficult and perhaps reserved for only the most egregious of cases, or where the matter is one of principle.  Extreme facts will generally be required to make out a negligence claim against government departments like the CBSA, and inappropriately short limitations periods exist for bringing these suits.

On August 31, 2023, the Canadian International Trade Tribunal (“CITT”) issued a revised notice of an Expiry Review in respect on the dumping and subsidizing of copper pipe fittings from the Socialist Republic of Vietnam (“Vietnam”).

The CITT defined the Subject Goods in its May 25, 2018 Finding: