Tax & Trade Blog
CITT: “Real” Importer Must have Ties to Commercial Transaction
Importers of goods have both current and ongoing responsibility and obligations under the Customs Act (the “Act”) and its Regulations. On a “current” basis (i.e., at time of importation), include reporting the goods for import, and proper declarations of value, tariff class and origin, and payment of applicable duties and other taxes. On an “ongoing basis”, the importer is required to correct errors in those declarations up to four years after the time of importation.
What if an “importer” is neither the owner nor purchaser of the goods? Does that “importer” escape liability for the duties and GST imposed under the Act?
In Landmark Trade Services, 2020 CanLII 34719 (CA CITT), the Canadian International Trade Tribunal (“CITT”) was asked to determine if a customs broker (Landmark), which declared itself as the importer of the goods in its interim accounting and later paid the applicable duties and taxes in respect of the goods, was the “real” importer of the goods at issue.
On the facts of the case, Landmark was a licensed customs broker and a corporate affiliate of Landmark Global Inc. (“LGI”), itself a US logistics company. The imported goods were sold by the foreign vendor to individual Canadian e-commerce customers. LGI provided certain logistics services to the foreign vendor. Landmark acted as the customs broker for LGI. When clearing the goods, Landmark chose to put its own Import/Export number on the Form B3s (Canada Customs Coding Forms) to account for the goods, then filed all required import documents, paying the applicable duties and taxes on the imported goods.
In a Trade Compliance Verification focused on tariff classification, Canada Border Services Agency (“CBSA”) determined that Landmark was the “importer of record” and had used incorrect tariff classifications when importing the goods. CBSA issued DASs to Landmark, demanding further duties to be paid on the goods, and directed Landmark to self-correct all other transactions of the same goods that were imported for the previous four years. Landmark made the self-corrections, and then appealed both the DASs and the self-corrections. CBSA determined that it had no authority to deal with the issues raised by Landmark, other than tariff classification and, since Landmark made no submission regarding tariff classification itself, CBSA upheld the tariff classification decision. Landmark appeal to the CITT.
The issue before the CITT was whether Landmark was in reality the “importer” of the goods in issue. The CITT started its analysis with a parallel definition of “importer” found in the Special Import Measures Act (“SIMA”) which, while not strictly applicable, was found to be “useful in determining who the importer is in the context of the [Customs] Act.” The CITT then considered the case in Artificial Graphite Electrodes and Connecting Pins (Re),  CIT No 14, also a case focused on determining who the importer of record was in reality. The Tribunal in Artificial Graphite determined that “in identifying the importer, SIMA had concern for substance as opposed to form” and that “the simple designation of a person or firm in the Customs entry documents as the importer (the so-called importer of record) obviously has little meaning.” In the result, in that case, the Tribunal determined that the importer on paper, which facilitated clearance of the goods and payment of duties, was not the importer “in reality”, as it was a simple “paper intermediary”, which never had possession of the goods and had done nothing to sell the goods or earned any profit/ commission on the resale of the goods.
Back to the Landmark case. The CITT in Landmark applied the Artificial Graphite reasoning to conclude that Landmark acted as a “paper intermediary” with no ties to the sale of the goods in issue. Although there was conflicting information as to who was the importer in the documentation, the CITT ruled that Landmark was not in realty the importer and, therefore, allowed Landmark’s appeal.
By way of commentary, the Landmark decision leaves more questions than answers, including how a company like Landmark is to be dissuaded from continuing this practice – which obviously puts the CBSA into a very difficult position when policing the self-compliance provisions of the Act. Also at issue could be any GST ITCs claimed by Landmark on these imports – which would seem to be precluded by de facto importer rules in the GST legislation.
One can see this case being potentially over-turned on appeal, on a couple of possible bases at least.
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