This bulletin has been updated to reflect the Government of Canada’s decision on March 27, 2020 to defer the payment of most duties and taxes until June 1, 2020.
This bulletin looks at the specific challenges affecting Canadian importers as a result of Covid-19, and the Canada Border Services Agency’s (“CBSA”) response, if any, to those challenges.
While the Canadian government has confirmed that the border will not close to trade in goods, the entry into the country is not the only consideration for industry. Importing goods requires significant paperwork, payment of duties and taxes. Importers also face customs audits and assessments, and may need to appeal from CBSA decisions they disagree with. Timelines for filing paperwork and appeals, and making payments are short. Missed deadlines will result in rejected appeals and significant monetary penalties where monies are due to CBSA. With many businesses working remotely, paperwork may be delayed. Further, as the economy slows, many businesses are experiencing serious cash flow difficulties.
No Relief on Customs Appeal Deadlines
Importers should be aware that there has been no move to suspend any statutory deadlines or other prerequisites to file appeals. All statutory appeal deadlines continue to apply, despite the crisis most businesses are facing.
As a general rule, all customs appeals are subject to at least two conditions: (i) any amounts claimed by CBSA must be paid in full before the importer can file an appeal; and (ii) the appeal must be filed by a certain deadline.
i. Payment in Full Prior to Appeal
CBSA can retroactively reassess duties and taxes for up to four years after the importation, and present the importer with a demand for payment. If the importer wants to challenge that decision, they can only do so by paying the amount demanded in full within 90 days of the decision they are seeking to contest.
With cash-flow drying up and lines of credit being exhausted importers may have difficulty finding the funds to pay those claims. If an importer is unable to pay the assessment in full within 90 days, it will not be able to challenge the assessment.
On March 27, the government announced that the due date for all payments due to the CBSA is June 30, 2020. Our initial conclusion concerning that decision is that it does not affect the importer’s obligation to pay all amounts owing to CBSA before any decision can be appealed. Importers are cautioned that, absent clarification from CBSA, if they wish to contest a current assessment, they should pay the amount assessed by CBSA and file their appeals within the normal timeframes, ignoring the announced extension of the delay to make payment.
ii. Appeal Deadlines
The deadline to file an appeal seeking a refund of customs duties paid can be as short as 90 days or as long as four years. As a general rule, where the duties are assessed as a result of a customs audit, the deadline is 90 days. Where the importer has discovered a refund opportunity, the deadline is generally four years. However, where the importer wants to claim NAFTA tariff treatment after importation, the deadline is only one year.
The government has not clarified whether deadlines to file appeals will be shifted in accordance with the extension of the deadline for payment. Until the government provides clear guidance on this matter, it would be prudent for any importer who wishes to appeal a CBSA decision, to pay duties and taxes and file an appeal within the normal appeal deadlines.
CBSA Has Suspended All Audit Activity
As a result of COVID-19, many CBSA officers have been sent home. However, CBSA’s computer networks (like many other networks across the government) do not seem to be capable of supporting those officers working remotely. Where officers can access the networks remotely, they can only do so for a limited time every day.
As a result, the Agency has announced it is suspending trade compliance activity interaction with importers/exporters until at least April 20, 2020. Effective immediately, all deadlines imposed by the officers in connection with audits are automatically extended by a period of time equivalent to the period of suspension.
CBSA is continuing to process duty drawback claims, applications for the duties relief program, and B2 requests for adjustments. These are unaffected by this temporary suspension.
CBSA Has Extended the Time to Pay GST and Duties and to File Corrections
On March 27, the CBSA announced that payments of duties on imports, re-assessments, penalties, etc. due to the CBSA will be deferred until June 30, 2020. This deferral includes changes on an importer’s statement of account for March, which would otherwise be due on April 1, 2020. Importer’s should note that the additional 30 days to make the corrections does not affect the importer’s deadline of 90 days in which to pay any amounts assessed in order to have the right to file an appeal from any contested audit decisions.
Importers are still required to submit accounting declarations for imported goods released on minimum documentation within defined timeframes. This has not changed. Late accounting penalties are applied when these timelines are not met. CBSA has announced a 45 business day grace period for late accounting penalties, applicable to transactions released from March 11, 2020, to May 14, 2020, inclusively.
Following an audit, importers are generally required to make corrections to prior import entrieswithin 90 days of the Final Audit Report, and failure to do so will result in significant penalties. CBSA has now provided an additional 30 days in which to make those corrections.
Canada Revenue Agency Moving Away from Fax Requirement
The Canada Revenue Agency (“CRA”) is in the process of establishing an email alternative to the current process by which many businesses must apply by fax to obtain a business number (“BN”). However, this process may take up to several weeks to implement. This is significant as many fax machines are in accessible these days because many businesses are operating remotely.
CUSMA (NAFTA 2.0) Implementation
According to the terms of the Canada-United States-Mexico Agreement (“CUSMA”), the agreement is due to come into force on the first day of the third month following the ratification of the last of the three parties. The agreement has already been ratified by the United States and Mexico and, on March 13, 2020, Canada finally ratified. That provides an implementation date of June 1, 2020.
Canadian importers and exporters have grave concerns that, in the current climate, two and a half months is insufficient time to allow for a seamless introduction of CUSMA. Importers will be seeking revised Certificates of Origin based on new rules of origin, and exporters will be rushing to understand the new rules and requirements. All this, while many businesses are closed and global supply chains are in flux.
To date, the Canadian government has been quiet on moves to postpone implementation, so importers and exporters that are looking for a seamless changeover should start preparing for the new requirements now.
We are living through unprecedented times when each day brings new challenges. The Canadian government is experiencing significant strain as the public service transitions to remote work, Canadian industry is in constant crisis management mode, and Canadians themselves are experiencing unprecedented emotional and economic stress.