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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COMPETITION BUREAU'S BROAD POWERS

FEDERAL COURT OF APPEAL DECISION IS A USEFUL REMINDER OF BASIC PRINCIPLES

On February 12, 2025 the Federal Court of Appeal (“FCA”) issued a decision upholding the Federal Court (“FC”) decision in Empire Company Limited and Sobeys Inc. v. the Attorney General of Canada (2025 FCA 34).  The case dealt with an application for judicial review of a decision of the Commissioner of Competition to commence an inquiry under the Competition Act (the “Act”, the same legislation which defines permissible multi-level marketing plans and illegal pyramid selling schemes in Canada). 

Accordingly, the case serves as a reminder of several principles regarding the Competition Bureau that are relevant to direct selling companies.

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US CBP AUDITS TARGETING CANADIANS?

CANADIAN EXPORTERS SUBJECT TO US CBP REVIEW, AUDIT & INVESTIGATION!

Current US vs. Canada trade tensions may be extending into US Customs & Border Protection ("CBP") audit, review and investigative activities – at least as they relate to exports to the US from Canada.

Viewed from the US perspective, these are "imported goods", and are required to be imported to the US correctly.

We have seen an uptick in US CBP inquiries, audits, reviews and investigations of Canadian businesses selling into the US, and that should be raising an alarm for all Canadian exporters.

The Canada Border Services Agency (“CBSA”) resets its “audit priority areas” twice per year.  Essentially, the CBSA designates certain tariff classification codes as priority areas for customs verifications (i.e., “audits”), based on the program areas which the CBSA believes pose significant risk for important non-compliance in tariff classification, valuation, and origin of goods.

The CBSA has released its January 2025 Trade Compliance Verification priorities, setting the stage for the next six (6) months.    As is often the case, most of the focus is on tariff classification.

All taxpayers under audit should be aware of both the scope and limitations of Canada Revenue Agency’s audit powers, as well as the consequence of failing to respond to a CRA Auditor’s valid request for documents or information.

The Federal Cout decisions in Canada v. Money Stop Ltd. (2013 FC 133), and Canada v. Money Stop Ltd. (2013 FC 684) are poignant reminders that ignoring the demands of a CRA auditor may land the Director(s) of the Corporation in prison!