Tax & Trade Blog

Canada Border Services Agency (“CBSA”) resets it “audit priority areas” twice a year. This sees CBSA designate certain tariff classification codes as priority areas for custom verifications (i.e., ‘audits’), based on the CBSA’s belief that those goods pose significant risks for non-compliance in terms of proper tariff classification, valuation, and country of origin.

CBSA has now released its July 2022 Trade Compliance Verifications, announcing a new priority area, as well as providing updates on a number of ongoing projects, which we have summarized below.

Seizures of cash have been increasing in Canada, usually at major airports, where Canada Border Service Agency (CBSA) agents are tasked with policing and enforcing Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Money Laundering Act” or the “MLA” for short).

Unfortunately, more often than not, the cash seems to be seized from unsuspecting travellers with good intentions, who are not involved in criminal activities but are simply unaware of their legal obligation to declare the proper amounts of cash they are traveling with when crossing international borders.

As we have blogged about several times in the past, homebuilders are frequently in the gunsights of CRA in hopes of capturing potentially unremitted GST/HST on sales made the course of their commercial activity.

A less-explored issue is how CRA sometimes casts too wide a net, and mistakenly assesses unlucky individuals who are not builders, but whose facts may suggest otherwise. The recent case in Wang v. The Queen, 2021 TCC 86 (CanLII) deals with this issue and serves as a cautionary tale for individuals in the unfortunate position of staring down a CRA assessment on the unplanned sale of their new home.

Times are changing for Canadian private corporations in terms of transparency and publicly available information. As of October 1, 2020, private companies in British Columbia have been required to maintain a registry of beneficial owners. Similarly, Québec’s transparency registry statute received Royal Assent on June 8, 2021. The Federal Government has also announced in its 2021 Budget that a publicly accessible beneficial ownership registry would be in place by 2025.

Not to be outdone, Ontario has joined the growing number of Canadian jurisdictions “pulling back the curtain” on private corporations, with plans to impose its own rules for registering beneficial ownership (the “Ontario Rules”). With the Ontario Rules set to come into force on January 1, 2023, the province will likely “leapfrog” the Federal Government.

Border searches can be nerve-wracking experiences, particularly if it involves an officer looking through your phone or laptop. Canadians and international visitors may therefore be surprised to know that thanks to a 2020 Alberta Court of Appeal (“ABCA”) decision, the CBSA does not currently have the right to search personal digital devices (“PDDs”) at ports of entry – at least in Alberta!

While this quirk looks like it will be temporary as the government has introduced Bill S-7 to address this issue, travellers should be aware of the amendments to the Customs Act (the “Act”) which are currently proposed, and might impact the state of the law going forward.

In the world of “natural health products” (“NHPs”), “NFR” is all the rage.   It is commonly believed that the NFR exception allows virtually any NHP to be imported to Canada, provided each importation is transacted in no more than a 90-day supply.

The key words here are “commonly believed”.   You might also say “commonly misunderstood” – and here is why.

It seems that the only thing hotter than inflation these days is CRA’s auditing and assessments in missing traders, carousel schemes and shams. Affected industries so far include telecom, gold and precious metals, diamonds and precious gems – and even include mom-and-pop start-ups in the home-made muffins industry.   Left unchallenged, these assessments can invariably lead to corporate bankruptcy and insolvency and, more problematically, can involve personal assessments of directors, spouses and children!

The primary customs valuation method across the Western world is “transaction value”, which is a way of valuing goods coming across international borders. Transaction value is used by both the US Customs and Border Protection Agency (CBP) and the Canada Border Services Agency (CBSA) to value imported goods entering their respective territories.

After our February blog post, the Department of Finance finally released draft legislation for its “luxury tax” on vehicles, aircraft and vessels (“items”). Assuming it is passed, the Select Luxury Items Tax Act (“SLITA”) is scheduled to come into force on September 1, 2022. Any business selling items to which SLITA applies will have to register with the federal government, pay the luxury tax, and file quarterly returns!

Taxpayers who seek to challenge tax assessments made by the Canada Revenue Agency (“CRA”) usually have the right to file a Notice of Objection (“Objection”), and those Objections are usually due within 90 days of the mailing date of the assessment.

Objection is the first and most important step of the taxpayers appeal process for any tax assessment, and the 90-day deadline generally should not be missed. For taxpayers that have missed the 90-day deadline, all hope is not lost, as there are special rules that might allow for a late-filed Objection. Taxpayers seeking to benefit from these rules should generally seek legal advice to understand and select the most appropriate next steps!

As covered in a prior blog, Canada has one of the most tightly-controlled dairy industries in the world.  It is not surprising then that the first decision of a dispute resolution panel (“Panel”) under the Canada-United States-Mexico Agreement (“CUSMA”) would involve Canada's dairy “supply management” system (the “Dairy Decision”).  

Ultimately, despite a US victory, the limited scope of the Dairy Decision means that any changes expected from Canada are unlikely to satisfy US-based dairy producers – with both sides seemingly claiming victory!

On March 25, 2022 the Canada Border Services Agency (the “CBSA”) issued a Notice of Initiation of Investigation under the Special Import Measures Act (“SIMA”) of alleged dumping and subsidizing of “Drill Pipes” originating in or exported from the People’s Republic of China. This investigation was prompted by a complaint filed by Command Drilling Products Ltd. of Nisku, Alberta.

In December 2021, the Department of Finance (“DOF”) released its draft Digital Services Tax Act (“DSTA”) announced in the 2021 Federal Budget. The proposed tax will impose a 3% digital services tax (“DST”) on large businesses providing taxable digital services to Canadian users – mirroring recent efforts discussed at the OECD to address the tax challenges of the digital economy.

While the DOF indicates that these measures will not be imposed earlier than January 1, 2024, and only if the treaty implementing the OECD Pillar One tax regime has not come into force, taxpayers should prepare for these changes now, since the revenue calculation requirements start as early as January 2022!

Despite its shaky initial rollout, the new Ontario Business Registry (“OBR”) looks like it is here to stay. Companies incorporated or doing business in Ontario (or indeed looking to potentially expand into the province) need to be aware of the substantial changes the new system brings.

This blog post will focus on changes to the process of filing annual returns in Ontario. Readers are reminded that the information provided is of a general nature and are advised to seek advice for their own particular situation, including regarding changes beyond the annual returns process.

Further to our recent blog which outlined Canada’s recent economic sanctions against Russia, Prime Minister Justin Trudeau has announcedfurther new sanctions in light of Russia’s invasion of Ukraine — mirroring those taken by other members of the international community.

The new measures target additional individuals and institutions to prohibit Canadians from dealing with same, as well as impose a blanket ban on engaging in any transactions with the Russian Central Bank.

On February 24, 2022 the Canada Border Services Agency (the "CBSA") issued a Notice of Initiation of Investigation under the Special Import Measures Act ("SIMA") of alleged dumping and subsidizing of Mattresses originating in or exported from China. This investigation was prompted by a complaint filed by Restwell Mattress Co. Ltd. And the United Steelworkers of Canada.

On February 22, 2022, Prime Minister Justin Trudeau announced new sanctions on Russia in response to Russia’s escalation of the conflict in Ukraine — lock-step with the positions taken by other Western world leaders.

More sanctions against Russia and particular members of its government are also expected to follow in light of last evening’s commencement of the Russian war in Ukraine, again in concert with other members of the international community.

A recent Federal Court of Appeal case dealing with standard form agreements is potentially welcome news for direct selling businesses which use standard, non-negotiable, distributor agreements for recruiting/managing their field force.

In the recent case Fédération des caisses Desjardins du Québec v. Canada (National Revenue), 2020 FCA 182 (CanLII) (“Desjardins”), the Federal Court of Appeal (“FCA”) overturned a Tax Court of Canada decision (“TCC”) which held that a person was an employee on the basis that the contract was not negotiated (i.e., a standard form contract) and that the individual had an obligation to work exclusively for Desjardins.

In our previous blog, we discussed CBSA’s Notice of Final Determination which concluded that imports of oil country tribular goodsfrom Mexico had been dumped (“OCTG3”).

Following CBSA’s determination, the inquiry moved to the Canadian International Trade Tribunal (the “CITT”) to determine whether Canada’s domestic industry had been injured by the dumping. On January 26, 2022 the CITT – much to the relief of importers – found that OCTG originating in or exported from the Mexico, has not caused and is not threatening to cause injury to the domestic industry!

The Customs Act (the “Act”) requires all persons arriving in Canada to report their imported goods brought into Canada. Accordingly, travellers arriving in Canada can expect to be investigated by the Canadian Border Services Agency (“CBSA”) who has been mandated to detect and apprehend violators of the Act. CBSA officers are vested with broad search and seizure powers.

Those in contravention of the Act may face enforcement actions including seizures, ascertained forfeitures, penalties and even potentially criminal smuggling charges!

On the civil side of things, CBSA’s enforcement actions can usually be challenged by acting timely and taking prudent steps such as, by engaging an experienced professional!