Tax & Trade Blog

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CUSTOMS NON-COMPLIANCE NEVER PAYS!

HIGH DUTIES AND TARIFFS MAKE NON-COMPLIANCE A TEMPTING TRAP

Given the high tariff rates importers are facing due to Canada’s retaliatory tariffs (actually surtaxes), importers may be tempted to consider various methods to try and minimize the duty paid.  Unfortunately, most of these methods could be considered “evasion” – and there is no shortage of unscrupulous people hawking them.  On balance, these strategies are a poor choice given the potentially serious consequences for violating customs laws. 

As an example, the European Public Prosecutor’s Office (the “EPPO”) recently dealt with a customs evasion scheme in Italy involving Chinese electric bicycles (“e-bikes”).

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RETALIATORY TARIFF RELIEF IMPLEMENTED

REMISSION AVAILABLE FOR SURTAXES IMPOSED ON US GOODS

We had previously written that the Government of Canada (“Canada”) was planning to provide a remission process for its retaliatory tariffs here. 

On April 16, 2025, Canada implemented the United States Surtax Remission Order (2025) (the “Order”), providing an avenue for much needed relief from its three rounds of retaliatory tariffs.  Importers seeking to mitigate the effects of Canada’s retaliatory tariffs should seek legal advice from international trade counsel to determine their eligibility and assist with remission applications.

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TARIFF WAR - ROUND 2

CANADA IMPOSES TARIFFS ON US STEEL AND ALUMINUM

The trade war between Canada and the United States (“US”) has taken a further turn for the worse. On March 12, 2025, President Trump imposed 25 percent tariffs on Canadian steel and aluminum products. Canada has now retaliated in kind, enacting the United States Surtax Order (Steel and Aluminum 2025) , which targets a wide list of US steel and aluminum products with a 25 percent surtax (the “Steel & Aluminum Surtax”). Businesses seeking to understand the scope of the Steel & Aluminum Surtax and mitigate its effects will require assistance from experienced International Trade counsel.

A Brief Review

President Trump, through an executive order on February 11, 2025, previously announced that 25 percent tariffs would be imposed on Canadian steel and aluminum products. 

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"RETALIATORY TARIFFS - STILL A BAD IDEA?

UNILATERAL FREE TRADE WOULD BE A BETTER ECONOMIC IDEA

 The trade relationship between the United States (“US”) and Canada has eroded with tensions devolving into a trade war.

As of today, the US imposed tariffs on Canadian goods appear to be "off again" until April 2^nd, but Canada's first round of "retaliation tariffs" are still "on" ("CT-R1").   That is strange.  Canada is "on" despite no current US tariffs to retaliate against?  Is Canada now the sole aggressor?

Should this on-again-off-again trade war continue to escalate, the US will likely impose even further reciprocal tariffs on Canadian goods, along with additional tariffs on Canadian steel and aluminum products, and timber, lumber and derivative products. In turn, Canada is planning to implement a more robust second round of tariffs targetting an additional $125 billion in US goods ("CT-R2").  

The trade relationship between the United States (“US”) and Canada received a brief period of reprieve with the recent 30-day postponement of President Trump’s blanket tariffs and Canada’s retaliatory countermeasures.  Despite this intermission, the US and Canada appear set to face off again with tariffs and other countermeasures, much like their counterparts on the ice in the nations face off. 

President Trump has shown a willingness to continue his strategy of cajoling Canada into trade concessions, as evidenced by his February 10, 2025, executive order imposing a 25% tariff on all steel and aluminum imports entering the US.  While there may be legitimate questions about the legality of such tariffs, in this dispute where the refs are off the ice the size of the US economy is a major advantage.

The 30-day moratorium on Trump’s and Canadian retaliatory tariffs should give Canadian importers and exporters some breathing room.  But that breathing room ought to be put to good use considering current duty minimization opportunities, with the future possible implementation of these tariffs in mind.  “Unbundling” is one technique for dealing with punitive tariffs and is reviewed here.

What is Unbundling?

While we are generalizing here, unbundling involves lawfully stripping away non-dutiable components from otherwise dutiable goods.  When goods are imported into a country, the value of those goods needs to be determined so that the proper amount of duty can be applied.  Both Canada and the United States (“US”) are parties to the General Agreement on Tariffs and Trade (the “GATT”) and employ a version of the GATT Valuation Code.  Under that code, the “transaction value” method is the primary system, and focusses on the “price paid or payable” for the imported goods, plus certain additions and less certain deductions.