On June 20, 2018, Bill C-21, An Act to amend the Customs Act was introduced in the Canadian Senate upon receiving third reading in the House of Commons. If enacted, the Bill will amend the Customs Act to allow the Canada Border Services Agency (CBSA) discretionary authority to collect personal information on all individuals who are leaving or have left Canada. Bill C-21 also proposes to add new provisions pertaining to conveyances obligations, exportation of goods, authorization to share customs information, and smuggling. Accordingly, businesses in Canada, the United States, as well as third-country nationals that have dealings in these two countries, should monitor the legislative development, and consider adjusting their cross-border travel plans and future operation strategies.
1. The Bill Expands CBSA’s Authority to Collect Information about Persons and Goods
With the passage of Bill C-21, the revised Customs Act will enable the CBSA to collect biographic information on any person who is leaving or who has left Canada. The data collected when a traveller enters one country at a land port of entry of Canada will serve as a record of the traveller’s exit from the United States, and vice versa. The biographic information not only includes the full name, date of birth, nationality, sex, and the travelling document, but also more detailed information such as the date, time and place of the person’s departure from Canada and, if the person arrives in the United States, the date, time and place of arrival.
In addition, the CBSA may require international carriers to collect and submit detailed biometric information on all travellers departing from Canada.
The CBSA will automatically share information with the Canada Revenue Agency and other federal government agencies (e.g., Employment and Social Development Canada and the Royal Canadian Mounted Police). This will facilitate tracking of days spent in Canada by non-residents and in turn, there may be more vigorous enforcements by the CRA of tax-related obligations. For example, non-residents who spend a total of 183 days in Canada in a year are deemed residents of Canada for income tax purposes, subject to relief under a treaty “tie-breaker” rule.
Similarly, Canadian businesspersons who frequently travel to the U.S. should also be aware of the number of days they are in the United States, in order to avoid being considered as a U.S. resident by the Internal Revenue Service (IRS). The IRS applies the “substantial presence test” to determine whether an individual qualifies as a resident for tax purposes.
Importantly, the proposed section 94 of the legislation requires that anyone leaving Canada present themselves to a CBSA officer if requested to do so, and “to answer truthfully any questions asked of them by an officer in the performance of their duties under this or any other Act of Parliament.” Failure to comply with this requirement is an offence under the Customs Act and can result in a fine or imprisonment.
This new obligation may become important in connection with the new smuggling exportation provision discussed briefly below. In a hypothetical scenario where a person represents that he or she is not exporting restricted goods and it turns out to be incorrect, the individual may be found to provide false information, and therefore be deemed to commit an offence by providing false answers.
2. The Bill Creates New Reporting Obligations for Conveyances
Bill C-21 also introduces new obligations to report information with respect to a “prescribed conveyance” that departs or is expected to depart from a place inside Canada for a final destination outside of Canada. The prescribed persons (as will be defined in the new regulations) must give the CBSA the following information:
- information about the conveyance or its travel route;
- information about any person on board or expected to be on board that conveyance;
- the last place inside Canada from which the conveyance departed, regardless of whether person boarded the conveyance at that place; and
- the date and time of the conveyance’s departure.
However, if the goods on board a conveyance proceeds directly from “one place outside Canada to another place outside Canada and passes through Canadian waters or Canadian airspace,” or from “one place inside Canada to another place inside Canada and temporarily leaves Canadian waters or Canadian airspace,” they do not have to be declared under the new exceptions.
To the extent that your business involves conveyances in and out of Canada, it would be prudent to monitor the implementation of the new reporting obligations to ensure compliance with the new rules.
3. The Bill Enforces Provisions against Smuggling
The Bill amends section 159 of the Customs Act to make it an offence to smuggle or attempt to smuggle out of Canada, whether clandestinely or not, any goods that are subject to duties, or any goods the exportation of which is prohibited, controlled or regulated.
Bill C-21 is likely to receive Royal Assent in the fourth quarter of 2018, when the Senate resumes in late September, 2018. Following royal assent of the legislation, all interested parties will be provided an opportunity to participate in the regulatory development process following the pre-publication of the regulations, which will include details of the legislation.