Tax & Trade Blog

A common misconception when it comes to oil and gas trading with Canada is that, for GST/HST purposes, there will never be any obligations on foreign sellers selling on a DAP basis.* This is not true, and there can indeed by GST/HST collection and remittance obligations on US and international sellers, if certain conditions are met.

To understand why these misconceptions exist, one needs a deeper appreciation of the Canadian GST/HST legislation, found in Part IX of the Excise Tax Act(“ETA”), and also to get deep into the mindset of the Canada Revenue Agency (“CRA”), which administers the ETA and enforces GST/HST compliance.

On May 27, 2023, the Canada Border Services Agency (“CBSA”) released long-anticipated draft amendments to the Value for Duty Regulations under the Customs Act.

The proposed changes may have major implications for how most goods are imported to Canada are valued and change how the terms “sold for export to Canada” and “purchaser in Canada” are defined – two bedrock definitions under the “Transaction Value” method.

These changes will likely have significant financial consequences for many importers, and for non-resident importers (“NRIs”) specifically!

The Consultation Period on these draft regulations closes June 26, 2023.

As we blogged about here, here and here, CRA continues to audit telecommunications businesses for possible sham and carousel transactions (i.e., GST fraud).

The alleged fraudulent activities come in many forms, and one auditing efforts seems focussed on suppliers and/or recipients connected to the Iris Technologies Inc. case, winding its way through the Tax Court of Canada (“Iris Technologies”).

Iris Technologies has been in the CRA’s gunsights for a number of years now, and allegedly involved in the fraudulent sale of long distance minutes to individuals and companies in Canada and abroad. CRA’s current focus appears to be on the allegedly fraudulent nature of these sales, seemingly taking the position that if Iris Technologies’ purchases and sales were sham transactions, then so too must be the suppliers and recipients transactions on the other side of Iris Technologies (i.e., those suppliers selling minutes to Iris, and those recipients purchasing minutes from Iris) – many (all?) of whom the CRA may be alleging are part of the same carousel schemes.

Further to our recent blogs here and here, Canada has announced even more measures to isolate Russia on the world stage.

Specifically, Canada joined other G7 nations to impose new Russian sanctions, announced in connection with the G7 Leaders’ Summit today in Hiroshima.

In short, over 70 new sanctions were announced, focussing on people viewed as “supporting Russia’s illegal military action and complicit in human rights violations”.  According to the Prime Minister’s Office, the sanctions target “17 individuals and 18 entities linked to Russian companies that provide military technology and know-how to Russia’s armed forces, family members of listed persons, and members of the Kremlin elite.”

On May 15, 2023, the Canadian International Trade Tribunal (“CITT”) issued a notice that it was beginning an Expiry Review in respect of dry wheat-based pasta originating in or exported from the Republic of Turkey (“Turkey”). 

Anyone wanting to participate in the expiry review must file a Notice of Participation with the CITT by May 30, 2023!

On April 26, 2023, the Canadian Border Services Agency (“CBSA”) issued a notice concluding its re-investigation in respect of corrosion-resistant steel sheet (“COR”) originating in or exported from China, Taiwan, India, or South Korea, and updating normal values and export prices. Normal values previously in place expired as of April 26, 2023!

Three (3) producers/exporters in China, three (3) in Taiwan, and two (2) in South Korea fully co-operated with CBSA and were assigned normal values (and export prices, as applicable) as part of the re-investigation. All other producers and exporters will be subject to the following rates of ADDs:

• China:................. 53.3%
• Taiwan:.............. 32.2%
• India:.................. 40.0%
• South Korea:...... 40.0%

On May 4, 2023, the Canadian Border Services Agency (“CBSA”) issued a notice that it will be conducting a re-investigation in respect of carbon steel welded pipe originating in or exported from Taiwan, India, Oman, South Korea, Thailand, and the UAE (the “Listed Countries”). CBSA has issued a Request for Information (“RFI”) to both importers and exporters, and responses are due June 5, 2023 and June 12, 2023, respectively!

Normal values established during the re-investigation will be effective as of the end date of the re-investigation, and all normal values currently in place will expire on that date.

Exporters of Subject Goods from the Listed Countries should consider cooperating with CBSA, as the potential anti-dumping duties (“ADDs”) for goods without normal values range from 29.6% for goods from Taiwan, to 54.2% for goods from the other Listed Countries. Exports from India are also subject to a countervailing duty (“CVD”) of 23,872 rupees per metric ton!

We frequently act for Clients whose goods or vehicles have been seized by Canada Border Services Agency (“CBSA”).   More often that one would think, these seizures involve goods or conveyances (e.g., tractor-trailers, utility vehicles, transport trailers) that are owned by a person other than the importer (e.g., lease goods, borrowed goods, goods subject to a PPSA security).

Where this happens, the true owner is a third party to the seizure but must often take specific steps to protect its legal interest in the seized property.   If nothing is done, the owner can often find the goods subject to forfeit and sold or disposed of by CBSA!

One of the most difficult aspects of dealing with anti-dumping measures can be figuring out whether goods are caught by an active measure or not. Because appeals in this area are pay-to-play, getting these issues right up front is extremely important!

Luckily, the Special Import Measures Act (“SIMA”) provides a formal process – called a “scope proceeding” – which will determine whether a good is caught by an Order (as well as Findings or Undertakings)!

While the technical aspects of a scope proceeding are complicated, based on historical jurisprudence in this area, many Clients prefer the certainty of a scope proceeding than simply importing on speculation – especially where the potential costs of CBSA taking a different view are measured in one, two and three times of goods sold!

On April 21, 2023, the Canada Border Services Agency (“CBSA”) released a notice that it was initiating investigations under the Special Import Measures Act into the alleged dumping and subsidizing of certain wind towers from China. The investigation was initiated following a complaint by Marmen Inc. and Marmen Énergie Inc., from Trois-Rivières, Québec.

According to the posted Investigation Schedule, responses to Importer and Exporter questionnaires are due May 12, 2023 and May 29, 2023 respectively! These dates are unlikely to change or be extended.  The CITT also recently announced its parallel process, with notices of participation due May 4, 2022!

On March 31, 2023, the Canada Border Services Agency (“CBSA”) released a notice confirming that its re-investigation in respect of grinding media originating in or exported from India had concluded, updating normal values and export prices.

One (1) producer/exporter fully co-operated with CBSA (AIA Engineering Ltd., or “AIA”, and associated subsidiaries), and was assigned normal values as part of the re-investigation. All other exporters of subject goods from India will be subject to 38.7% anti-dumping duties (“ADD”) and counter-vailing duties (“CVD”) of 24,831 Indian rupee per metric tonne.

If you disagree with a decision made by the Canada Border Services Agency (CBSA) regarding imported goods, you may have the right to administratively appeal the decision under section 60 of the Customs Act. Recently, key CBSA administrative materials which govern this procedure were updated with the aim to “streamline” this process. The result contains both good and bad news for parties hoping to resolve disputes before escalating to further tribunals or courts.

An oft-overlooked component of Canada’s Excise Tax Act (“ETA”) involves the special registration rules which apply to taxi businesses – in place well before the advent of ride-sharing services like Uber and Lyft.

CRA has recently updated its administrative policies on these registration rules to reflect changes made to the ETA on this issue back in 2017!  The new changes update CRA’s published position to incorporate commercial ride-sharing services within the definition of taxi business and is indicative of the risk in relying on such positions which could be out of date and offside current law.

We are no strangers to helping individuals who find themselves subject to a Canada Border Services Agency (“CBSA”) seizure and all the consequences that come with that – including NEXUS seizures and revocation. But when it comes to bringing plant or animals (or their derivatives – e.g., food) into Canada, travellers can inadvertently commit a violation which is very punitive and difficult to defend.

Specifically, the Agriculture and Agri-Food Administrative Monetary Penalties Act (“AAAMPA”) imposes violations (“AAAMPs”) which leave no room for reasonableness or diligence. Even with the hurdles involved, however, appealing an AAAMP might be worthwhile (and successful) – particularly given that it can lead to continual secondary screening and a loss of NEXUS eligibility!

As we discussed in our prior blog, the Canada Border Services Agency (“CBSA”) has been conducting a re-investigation in respect of oil country tubular goods (“OCTG”) and certain seamless casing originating in or exported from China.

On March 17, 2023, CBSA released a notice confirming that the re-investigation concluded, updating normal values and export prices. That means normal values previously in place expired on March 17!

On March 13, 2023, the Canadian International Trade Tribunal (“CITT”) issued a notice that it was beginning an expiry review in respect of certain steel piling pipes originating in or exported from the People's Republic of China (China). Anyone wanting to participate in the expiry review must file a Notice of Participation with the CITT by March 28, 2023!

Both domestic producers and exporters should consider participating in the expiry review, as current anti-dumping duties (“ADDs”) for goods without a normal value are 96.4%, and countervailing duties (“CVD”) are 641.35 Chinese Renminbi (RMB) per metric tonne!

On Friday, March 10, 2023, the Canadian government announced it is banning the import of certain aluminium and steel products from Russia. This comes as a sanction against Russia for its actions in Ukraine, and is coordinated with the US’s 200% tariff on aluminum products that came into effect the same day.

On February 21, 2023, the Canada Border Services Agency (“CBSA”) concluded its normal value review of refined sugar exported from the US by United Food Group Inc. (“United”).

Unlike re-investigations, where the CBSA reviews and redetermines normal values for all exporters in the industry, in a normal value review the CBSA only reviews the normal values of the named party – in this case United.

This particular normal value review was triggered by an importer appeal. However, while United responded to the CBSA’s RFI, the producer of the goods did not, and accordingly the CBSA concluded the review.

The right to make a customs or Special Import Measures Act (“SIMA”) appeal is very different than the right to make similar income tax or GST appeals. Unlike income tax or GST, appeals for customs and SIMA cases can ONLY be made once full payment of ALL amounts assessed has been made to the government!

This unfair situation is presenting problems for Canadian commercial importers who want to fight their Canada Border Services Agency (“CBSA”) customs and SIMA assessments but lack the financial ability to do so.   The issue is especially severe in the case of SIMA assessments, where the amounts being levied by CBSA can sometimes exceed two or three times the total value of the imported goods themselves – and add up to 10 or 20 times the profit margin that the importer expected to earn from these import transactions.