3 Things US Importers Need to Know that Could Impact Their Bottom Line
Guest Authors: David Crawford of Achen Henderson CPAs and Ernie Ubriaco of Custom Trade Services Inc.
The Canada Border Services Agency (CBSA) is responsible for enforcing many of Canada’s laws at its borders, from customs and trade to human trafficking. The CBSA is not only responsible for border control but is tasked with the collection of duties and taxes assessed on imported goods in addition to penalties issued against contraventions. The CBSA is responsible for enforcing and administering the Customs Act, Customs Tariff Act, along with other laws to ensure the correct declaration of duties and taxes have been remitted by the Non-Resident or Canadian Resident Importer of Record (IOR).
US IOR’s are bound by the same rules and regulations as Canadian companies. The onus is on the IOR to report, self-assess, and make corrections within 90 days of having reason to believe an error has occurred.
With the recent pace of legislative changes in Canada’s tax and customs system, there are constant changes to existing regulations and the introduction of new regulations that will impact your bottom line and ability to seamlessly import goods into Canada. The CBSA will be implementing a major change this year and proposing a change to how value is declared for Non-Resident importers.
Below, we have highlighted three key issues that US importers should be aware when importing into Canada.
CARM: CBSA Assessment and Revenue Management
CARM is a multiphase project to modernize the collection of duties and taxes for commercial goods imported into Canada. With CARM, the CBSA is updating its 35-year-old legacy system allowing importers, customs brokers, and trade consultants to view importer transactions and statements of accounts vias the CARM online portal.
The CARM portal will also act as a service tool to facilitate accounting and payment with the CBSA. The significance for IOR is that they must be registered on the portal and will be responsible for payment of duties and taxes directly with the CBSA. Customs brokers will no longer be making payments on behalf of IOR.
The go-live date for CARM has been reset to October 21, 2024, and with any major change of this magnitude, comes challenges. Although the CBSA has advised the portal is ready, Trade Chain Partners (TCP) who have been involved in the testing phases have identified flaws and shortcomings. The TCP stakeholders hope all issues are resolved before go-live.
Proposed Amendments to the Value for Duty Regulation
The CBSA is also proposing amendments to the Valuation for Duty Regulation that intends to strengthen the statutory and regulatory frameworks to help Canadian Importers compete on a more level playing field with foreign based importers. The proposed change will address the loss of customs revenue from duties not paid on lower value import declarations.
Canada’s regulatory framework on determining the value for duty of imported goods creates an unfair advantage for Non-Resident IOR’s as they can currently declare a lower priced sale, which ultimately contributes to paying less duty on the imported goods. There is ongoing consultation with the TCP community, and we await the outcome and how these changes may impact Non-Resident Importers.
Canada’s new supply chain reporting – Forced and Child Labor in the Supply Chain
Very quietly, Bill S-211, which is an Act to enact the fighting against forced labor and child labor came into force in 2023. The first reporting period for 2023 had to be filed with the Minister of Public Safety no later than May 31, 2024.
The legislation implements Canada’s international commitment to cleansing the global supply from forced and child labor through the imposition of reporting obligations on entities producing goods in Canada or elsewhere or in importing goods produced outside Canada.
All entities that produce, sell, distribute goods in Canada or elsewhere and import into Canada goods that are produced outside of Canada are obligated to prepare a report and submit to the Minister of Public Safety each May 31 following the calendar year. Under the new rules, an entity is a corporation or a trust, partnership, or other unincorporated organizations, however, there are certain criteria to be met for an entity to have reporting obligations. One such criteria is that the definition of ‘Entity’ includes entities headquartered and operating in Canada or in any other country or jurisdiction.
It should also be noted that once a report is completed, it must receive approval from the appropriate governing body or bodies who have legal authority to bind the entity. A signed ‘Attestation’ must be prepared and submitted with the report.