Tax & Trade Blog

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CUSTOMS 101: NO PROOF, NO FREIGHT DEDUCTION?

CITT TIGHTENS EVIDENTIARY REQUIREMENTS FOR FREIGHT DEDUCTIONS

Transaction value has traditionally been used to value imported goods to Canada in approximately 95% of cases.  An important deduction available to importers when using transaction value is for transportation costs incurred from the place of direct shipment to Canada.

In Korhani of Canada Inc. v. CBSA (AP-2022-030), the Canadian International Trade Tribunal (“CITT”) serves notice that it supports the CBSA’s position that transportation cost deductions must be supported by objective documentation evidencing the actual transportation costs, such as payment records or shipping invoices.

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ENABLERS TARGETED BY CRA & CBSA ALIKE

RECENT ACTION ON CAR THEFTS EASILY TRANSLATES TO TAX & CUSTOMS MATTERS

Recent news reports about Project Chickadee – the OPP and CBSA joint project aimed at dismantling organized car theft rings exporting stolen Canadian vehicles overseas – focused on an effort to target not only the direct causes of these thefts (the gangs stealing the vehicles), but also the ENABLER:  freight forwarding companies, shipping companies, and other intermediaries effectively aiding and abetting the process.

The Canadian government’s ability to intervene in situations that it does not ultimately like (i.e., tax schemes, GST shams, tariff fraud) knows no bounds.   And the government’s response does not always require joint work with the OPP or RCMP, but can come in much more innocuous ways. 

In this report, we examine a couple of ways in which Canada Revenue Agency (“CRA”) and Canada Border Services Agency (“CBSA”) can target persons indirectly associated with GST or customs non-compliance.

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TAX AUDITS NOT ALWAYS CORRECT

CRA DATA SHOWS THE MAJORITY OF TAX AUDITS OVERTURNED!

When most taxpayers receive a Notice of Assessment from the Canada Revenue Agency (CRA), they likely have the following concern: what did I do wrong? That first instinct – although likely well-founded in the human psyche – ends up being a statistically incorrect assumption. In fact, the most recent data from the CRA suggests that the majority of CRA Assessments are INCORRECT and are ultimately overturned on Objection.

This Tax Audits Series Report reflects on this data and its implications and “best practices” for taxpayers.

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CBSA COMPLIANCE VERIFICATION PRIORITIES

CONTINUED FOCUS ON U.S. & CHINESE SURTAXES

The Canada Border Services Agency (“CBSA”) has released its January 2026 update to its compliance and verification priorities.  This update is part of the CBSA’s semi-annual process of resetting its verification priorities, which occurs in January and July of each year.

In this January 2026 update, new priorities include certain global surtaxes, amongst other items. Enforcement of Surtaxes Orders on Chinese and U.S. goods also remain a prominent holdover from previous rounds.  We provide a detailed breakdown of these priorities below.

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BILL C-251 AND MODERN SLAVERY

CANADA'S PROPOSED PRESUMPTION AGAINST FORCED-LABOUR IMPORTS

Bill C-251 (An Act to amend the Customs Act and the Customs Tariff) was introduced in October 2025. If enacted, it would establish a statutory presumption that goods originating from designated countries are made in whole or in part by forced or child labour and are therefore prohibited from importation into Canada.

The Bill would also impose due diligence obligations on importers, who would be required to demonstrate to the Canada Border Services Agency (“CBSA”) that they have performed effective due diligence on their supply chain. Given the potential impact of this Bill, all importers should closely monitor developments as the bill moves through Parliament.

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US NO LONGER RAISING TARIFFS ON WOOD PRODUCTS

DUTIES ON LUMBER & WOOD CABINETS/VANITIES WERE TO DOUBLE - BUT NOT ANYMORE!

A recent last-minute announcement by the United States (US) government that it will NOT proceed with increasing certain tariffs is just the latest demonstration of how fluid and uncertain the US tariff situation is.  Happily, it provides some relief to Canadian exporters of kitchen cabinets, bathroom vanities, and other wood products.  It may imply more good news is to follow, but it certainly shows how hectic the tariff situation is for Canadian exporters to the US.

Further detail below.

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CRA GST & INCOME TAX AUDITS

UNDERSTANDING A CRA AUDITOR'S POWERS & METHODS

As most people understand, “Audits” are the Canada Revenue Agency’s (CRA) primary tool for verifying voluntary compliance with Canada’s taxing legislation, including the Excise Tax Act (ETA) for GST purposes, and the Income Tax Act (ITA) for income tax obligations.

Less well known is the scope of the CRA’s powers when it comes to demanding answers to its questions and reviewing business records.  In this Tax Audits Series Report, we examine these broad powers, and what taxpayers can expect when audited.

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GOVERNMENT PROCUREMENT COMPLAINTS

PUTTING YOUR BEST FOOT FORWARD AT THE CITT - BEFORE JUDICIAL REVIEW

Adjudicating government procurement complaints is one of the most important functions the Canadian International Trade Tribunal (“CITT”) plays for Canadian businesses.  In these cases, the CITT serves as the referee when government contracts are handed out improperly.

As a recent decision of the Federal Court of Appeal (“FCA”) indicates, it is best to put one’s best foot forward before the CITT because the courts afford significant deference to the decisions the CITT makes, and it will be extremely difficult to have the decisions overturned on judicial review.

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SIMA RELIEF FOR SMALL SOLAR MODULES?

CITT CONSIDERING REQUEST FOR EXCLUSION FROM SIMA DUTIES

On December 11, 2025, the Canadian International Trade Tribunal (CITT) announced the commencement of an interim review regarding its existing order imposing Anti-Dumping Duties (“ADDs”) and Countervailing Duties (“CVDs”) on certain Photovoltaic Modules and Laminates from China.  The review will consider introducing an exclusion to the definition of Subject Goods which would effectively remove Anti-Dumping Duties from a narrow subset of Chinese solar panels.

Below, we explain what interim reviews are and why they are a useful tool to ensure that Canada gains from global innovation while protecting its domestic industry from unfair foreign competition.

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TRQ IMPORT ALLOCATION INSPECTIONS

OBTAINING A TRQ IS NOT THE END OF THE STORY!

We have previously written about tariff rate quota (“TRQ”) applications for dairy and poultry here.  While many businesses may view obtaining a TRQ import allocation as the final step of the process, the reality is that it is very much the beginning of the TRQ process.

Both Applicants and Allocation Holders (i.e., persons/organizations issued a TRQ import allocation) remain subject to ongoing importer compliance obligations under the Export and Import Permits Act (“EIPA”), the Import Allocation Regulations (“IAR”) and associated TRQ policies (collectively, the “TRQ Regime”).  As EIPA inspectors have broad inspection powers, failing to adhere to these compliance obligations could lead to significant financial (and other more serious) consequences.  

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GST 201: CAPITAL PROPERTY

UNDERSTANDING THE FINE LINE BETWEEN CAPITAL & NON-CAPITAL PROPERTY

This is another in our GST 201 Series Reports, written to provide in-depth analysis of key topics under Canada's GST/HST regime.

In this Report, we focus on “capital property”, an overlapping concept under both the ITA and ETA that determines how special input tax credit rules apply to commercial activities.

Determining whether a property is capital is a fact-driven exercise, and even small factual differences can lead to very different results.

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CBSA LOSES CHALLENGE ON NHP IMPORTS!

CBSA ARGUED CHANGE IN EXPLANATORY NOTES REQUIRED EVIDENCE OF EFFICACY

The recent decision of the Canadian International Trade Tribunal (the “CITT”) in Atrium Innovations Inc. (AP-2021-032 and AP-2022-026) is good news for importers of licensed Natural Health Products (“NHPs”). 

In its decision the CITT upheld 25 years of precedent and rejected arguments by the Canada Border Services Agency (the “CBSA”) that December 2019 changes to the WCO Explanatory Notes now require evidence of efficacy before classifying an NHP as a “medicament” for tariff purposes.

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FUEL VENDOR REGISTRATIONS IN CANADA

OVERVIEW OF FUEL TAXES & REQUIRED REGISTRATIONS

Canada’s fuel tax and registration landscape involves a patchwork of federal and provincial laws. Depending on the nature of their activities, both resident and non-resident oil and gas companies operating in Canada face many layers of compliance obligations.

This blog provides a high-level overview of the kinds of registrations or licenses that may be required for those selling or distributing fuel in Canada.

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CHINESE STEEL IMPORTS COSTLY

IMPORTING CHINESE STEEL HAS COSTLY CUSTOMS DIMENSIONS

While the recent focus in Canada has been on the tariff war between Canada and the US (for example, President Trump's tariffs on certain imported Canadian steel, and Prime Minister Carney's retaliatory surtaxes on same), what many have overlooked are similar Canadian surtaxes on Chinese steel and aluminum, which pre-date both.

As a number of Canadian importers have figured out, importing Chinese steel comes at a very significant cost on two different fronts.

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CUSTOMS RULES & CRIMINAL OFFENCES

IMPORTER BEWARE: CUSTOMS NON-COMPLIANCE CAN BE A CRIMINAL OFFENCE

Earlier this year, Canada Border Services Agency (“CBSA”) intercepted a shipment declared to be electric fans from China.  When opened, CBSA found no fans, but almost 20,000 cartons of cigarettes, with a market value of about $2.2 million. (!)

Everyone knows that smuggling millions in cigarettes into Canada is a crime.  Like importing other sensitive goods (e.g., a prohibited weapon), many forms of importation can amount to criminal conduct, carrying with them potential offences under the Criminal Code.  Not all customs errors or violations amount to criminal conduct, however.  We explore the line between the two below.

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MANITOBA RST EXTENDED TO CLOUD SERVICES

PROVINCE CONTINUES TREND OF IMPOSING PST ON CLOUD SERVICES

We have previously written about Manitoba’s proposal to extend coverage of its Retail Sales Tax (“RST”) to cloud services here. With the recent enactment of Bill 46 on November 6, 2025, Software as a Service (“SaaS”), Platform as a Service (“PaaS”), and Infrastructure as a Service (“IaaS”), will be subject to Manitoba’s 7% RST starting January 1, 2026.

Manitoba now becomes the latest member of Western Canada to subject cloud services to provincial sales tax (“PST”), joining British Columbia (“BC”) and Saskatchewan (“SK”). 

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CRA AUDITS PURPOSE-BUILT HOUSING REBATE

CRA REBATE ADMINISTRATION LEADS TO MANY DENIALS

When Prime Minister Justin Trudeau’s Liberal government announced its new 100% GST rebate for tax paid on the construction of qualifying new rental housing in September 2023 (which we blogged on here), the measure – formally called the Enhanced GST New Rental Housing Rebate – was unveiled with considerable fanfare.  In fact, it was touted as a key pillar of Canada’s renewed national housing strategy, and designed to reduce development costs, accelerate construction of much-needed rental units and increase long-term affordability for renters across Canada.

That fanfare has now met the practical reality of tax auditors at CRA charged with reviewing and auditing these Rebate Applications.   In fact, CRA is now actively auditing in this area and rejecting a number of Rebate Applications for failing to meet the very complicated rules that came with the new Rebate process.

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NEW FOOD LABELLING RULES INCOMING

AMENDMENTS TO FOOD AND DRUG REGULATIONS TAKE EFFECT IN THE NEW YEAR

After nearly four years, amendments to the Food and Drug Regulations (“FDR”) labelling regime, previously enacted in July of 2022, are set to take effect on January 1, 2026.

While the changes are laudable from a public health perspective, parties selling regulated food products (“Regulated Parties”) need to ready themselves for compliance with these changes, and in this report, we provide a brief overview of the key changes.

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CANADA-AUSTRALIA CUSTOMS PACT SIGNED

AUSTRALIA-CANADA'S LATEST PARTNER IN CUSTOMS MUTUAL ASSISTANCE AGREEMENT

Since 1979, Canada has been putting together a web of Customs Mutual Assistance Agreements (“CMAAs”) with a number of trading partners, including the US, Mexico, UK, EU, Israel, China, Korea, Chile, and Argentina.  Australia recently became the 15^th nation to agree to a CMAA with Canada, and we discuss below how these protocols allow Canada to tighten its enforcement on goods coming into Canada from foreign lands.

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MAJOR CHANGES TO CUSTOMS LIABILITY!

"IMPORTER OF RECORD" WILL BE JOINTLY LIABLE FOR PAYMENT OF DUTIES AND TAXES

On January 1, 2026, amendments to subsection 17(3) of the Customs Act (“CA”) come into force that make the “importer of record” jointly liable with the owner of the goods for duties and taxes on imports.

This development will impact customs brokers in the freight forwarding industry who have enjoyed protection from customs liability for the past few years. 

Following the coming into force of these amendments, there may no longer be any escape of liability for duties when a broker identifies itself as the “importer” (i.e., using its name and business number to obtain release of an import from the Canada Borde Services Agency (the “CBSA”)).