Tax & Trade Blog

---

CANADA'S THIRD-PARTY STEEL SURTAX

HIGH SURTAX RATES APPLY FOR STEEL IMPORTS ABOVE QUOTA LIMITS

As a follow up to our Steel Derivative Surtax Report here, over the recent Christmas holidays Canada also quietly amended the Surtax on the Importation of Certain Steel Goods (the “3P Steel Surtax”) and put in place a Remission Order for the same over the holiday period.

In this report, we report on the application of the 3P Steel Surtax, highlighting the tonnage tariff rate quota (“TRQ”) rules, import permit requirements, and relief available surtax exceptions and the Remission Order.

---

SURTAX ON STEEL DERIVATIVE GOODS

BUSINESSES AND CONSUMERS TO FEEL FINANCIAL IMPACT OF NEW SURTAX

During the Christmas holiday season, the Federal Government of Canada quietly adjusted its trade policy QUITE significantly.  A significant development on this front is likely Canada’s enactment of the Steel Derivative Goods Surtax Order (the “Steel Derivative Surtax”) through an Order in Council.

We report below on the application of the Steel Derivative Surtax, and the particular goods targeted by these measures, and potential financial relief that may be available for businesses.

---

TAX LITIGATION 201: CHOICE OF VENUE

NOT ALL CRA DISCRETIONARY DECISIONS GO TO FEDERAL COURT!

Since the Supreme Court of Canada’s 2024 decisions in Iris Technologies and Dow Chemical, many taxpayers and tax practitioners have become well aware that the Tax Court of Canada is not a ”one-stop shop” for tax disputes. 

The rule of thumb for "jurisdiction" is that most tax cases go to the Tax Court of Canada, but that CRA discretionary decisions must be challenged in the Federal Court.

As we see in the Ingredion case dealt with below, that may not ALWAYS be the case – and it introduced a third possible jurisdiction in some cases:  Provincial Superior Courts!

---

ZERO-RATED OR TAXABLE FOOD & DRINKS?

GST: FINE TECHNICAL LINE BETWEEN ZERO-RATED & TAXABLE FOR FOOD & DRINKS

The supplies of food and beverages that are for human consumption are generally zero-rated for GST/HST purposes in Canada – meaning that a 0% rate of tax applies!   There are exceptions, however, particularly where the food or beverage falls into one of the specific exclusions set out in Part III of Schedule VI to the Excise Tax Act (“ETA”).  This set of rules generally reflects Canada's intention that most food and drink products are free of GST, with the exceptions being fairly limited in scope.

Regrettably, recent Tax Court of Canada (“TCC”) jurisprudence may be applying a more restrictive approach and have been more willing to deny zero-rated treatment based on a threshold inquiry into whether the product qualifies as “food” or “beverage” in the first place.  This is a marked change from earlier jurisprudence.

---

TAX OBJECTION DECISIONS TAKING LONGER

POST COVID, CRA APPEALS BRANCH SLAMMED WITH NEW WORK!

The Canada Revenue Agency (CRA) recently released its 2025-26 Departmental Plan (“the Report”), outlining its priorities and recent performance.  It reveals a critical piece of information that should serve as a warning for all taxpayers: the CRA is being overwhelmed by Notices of Objections (“NoOs”) and is struggling to keep up.

As we report on below, large businesses with complex tax issues are likely to suffer the most.

---

CBSA INVESTIGATING FORGED GRINDING MEDIA

ALLEGED DUMPING OF FORGED GRINDING MEDIA FROM CHINA

On January 9, 2026, the Canada Border Services Agency (“CBSA”) issued a Notice of Initiation of Investigation under the Special Import Measures Act (“SIMA”) in respect of the alleged dumping of forged grinding media originating in or exported from the Peoples’s Republic of China (“China”).  This investigation was prompted by a complaint filed by Moly-Cop Canada.

The investigation continues a trend by the CBSA of scrutinizing imports from China, which continues to be the jurisdiction with highest number of Anti-Dumping and Countervailing duty orders.

---

A CUSTOMS YEAR-END REVIEW

THE TRADE WAR & NOTABLE CASES IN 2025 YOU SHOULD KNOW ABOUT

What just happened to me!   That is probably the sentiment of most people in customs and trade in Canada, after a frenetic 2025.

We present a year-in-review below, starting quite understandably with a high-point review of the Canada-US Trade War (the “Trade War”), followed by some other major developments that dominated customs in the Canadian context.

THE GREAT TRADE WAR OF 2025

---

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.

---

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.

---

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.

---

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.

---

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.

---

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.

---

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.

---

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.

---

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.

---

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.  

---

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.

---

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.

---

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.