The Canada Border Services Agency’s (“CBSA”) official position is that only the “importer,” the “owner” of the goods, or a licensed customs broker acting on their behalf are authorized to account for commercial goods and be named as “importer of record” (“IOR”) on the Canada Customs Coding Form (“B3 Form”). This position, supported by a recent Canadian International Trade Tribunal ruling, may cause problems for entities other than importers, owners and brokers that may wish to be recorded as an IOR in certain situations.
Background
When importing commercial goods into Canada, importers (or licensed customs brokers acting on their behalf) must fill out the B3 Form to account for the imported goods.
An issue may arise when a person that is neither the “real” importer nor the owner of the goods declares itself as the IOR and accounts for the goods. In a recent unpublished interpretation, the CBSA reaffirmed that only the “importer” or the “owner” of the goods, or a licensed customs broker (acting on their behalf) are authorized to account for commercial goods, thereby restricting the range of persons that can be named as the IOR on the B3 Form.
Hypothetical scenario
In a hypothetical situation pertaining to the importation of supply-managed goods, Company A is a Tariff Rate Quotas (“TRQs”) holder for the importation of Supply Managed Products in Canada. It is noteworthy that the imports of TRQ goods within the limit of the specific quota allocation by an importer are subject to lower rates of duty of the “within access commitment” with proper specific import permits issued by Global Affairs Canada (“GAC”). Company B is a wholly owned subsidiary of Company A and is not a TRQ holder. Company A accepts to act as the IOR in Canada (on behalf of Company B) with respect to the importation of TRQ goods, which were acquired by Company B outside Canada for the purpose of importation in Canada, using Company A’s own quota allocation and import permits issued by GAC.
The CBSA’s position
The CBSA considers that Company A cannot legally act as the IOR in the hypothetical scenario. While the term “importer” is not defined in the Customs Act, it has been defined in case law as the entity that “caused the goods to be imported.” Citing section 32 of the Customs Act, the CBSA reaffirms that “only the importer, owner, or licensed customs broker as agent on their behalf are authorized to provide the accounting for commercial goods.” Therefore, an entity that is not a licensed customs broker – such as Company A – is not legally authorized to provide accounting on behalf of Company B. The CBSA is of the view that Company B should be recorded as the official IOR as it caused the goods to be imported into Canada by purchasing them outside Canada for import purposes. In the hypothetical scenario, Company B is both the real “importer” and the owner of the goods at the time of importation.
The CBSA also considers that the identification of the true importer is important for risk assessment and liability purposes: in the event of a compliance verification, Company B, as purchaser and owner of the goods, should be the holder of the records pertaining to those goods.
The Landmark decision
The CBSA’s position is also in line with the recent decision of the Canadian International Trade Tribunal (“CITT”) in Landmark Trade Services v. President of the Canada Border Services Agency (“Landmark”) on the identification of the real importer. Landmark, a licensed customs broker, had used its “customs broker non-commercial imports account” to account for certain e-commerce goods purchased by individual customers in 2017. When accounting for the imported goods, Landmark declared itself as the IOR on the B3 Forms and paid the applicable duties and taxes in respect of the goods.
Arguments of the CBSA and Landmark
In 2018, the CBSA initiated a Trade Compliance Verification focused on tariff classification and determined that Landmark had used incorrect tariff classifications when importing the goods. The CBSA determined that Landmark was the IOR and issued Detailed Adjustment Statements (“DASs”) in which it directed Landmark to pay further duties and to self-correct all the transactions for the previous four years. Landmark complied with the DASs but later appealed them, stating that it was not the true importer of the goods in issue. Landmark submitted that it acted as the customs broker rather than the importer, owner, or any person liable for the payment of duties; the true importers were the individual consumers for whom Landmark was facilitating the import. Therefore, Landmark argued, the DASs that were issued by the CBSA were invalid. The CBSA, for its part, argued that Landmark acted as importer as its actions went beyond those of a customs broker. Landmark imported the goods through a commercial stream, used its own business account to account for the goods, and paid duties, thereby “caus[ing] the goods to be imported into Canada” (para. 34).
CITT rules that Landmark was not the true importer
The CITT ultimately sided with Landmark, finding that it was not the true importer of the goods but rather a “paper intermediary” (para. 47). The CITT found that customs forms, such as the B3 Form, may be indicative of the identity of the importer but they are not determinative. Rather, the facts of the importation need to be examined as a whole. Given that Landmark did not purchase the goods, take title or possession of them, nor participate in their sale, the CITT found that Landmark cannot be said to have brought the goods into Canada. Consequently, Landmark was not the real importer of the goods, and the DASs that were issued were invalid.
The CITT noted that the determination of the identity of the real importer is important for two reasons. First, the application of certain General Import Permits for the importation of TRQ goods for “personal use by the importer” at “within access commitment” rates depends on the identity of the real importer (para. 14). Second, DASs that are issued to a person that is not the real importer of the goods in issue are invalid (para. 15).
Key takeaway
Although the conclusion that a specific IOR on a B3 Form is not the real importer of the goods in a specific situation may have a positive outcome for some businesses (as was the case for Landmark), it could have detrimental impact for others. This is especially true in the case of goods that are subject to the requirements of other government departments and agencies and may require permits or certificates for import purposes. For example, in the hypothetical scenario described above, Company B, as the real importer, should no longer be in a position to import TRQ goods “within access commitment” (within an established import access quantity subject to a lower rate of duty). Based on the Landmark decision, the DASs to be issued to Company B on this basis (i.e., imports “over access commitment” for imports made outside the established quota for the TRQ goods which are subject to a higher rate of duty) should be valid even though Company A, as the IOR, using its own quota allocation and import permits issued by GAC, imported the TRQ goods at a lower rate of duty.
Jean-Guillaume Shooner is a partner in the Tax Group with Stikeman Elliot LLP. He specializes in commodity taxation (including Goods and Services Tax/Harmonized Sales Tax, Québec Sales Tax and provincial sales taxes), customs, import/export controls, excise taxes, fuel taxes and various international trade issues. Jean-Guillaume acts for major Canadian and multinational corporations and provides strategic advice in the areas of international trade, customs, Goods and Services Tax/Harmonized Sales Tax, sales tax, dispute settlement and regulatory matters. Jean-Guillaume also advises on CUSMA (USMCA) compliance, valuation issues and tariff classification. He has expertise with respect to import and export license requirements for controlled nuclear substances under the Nuclear Non-proliferation Import and Export Control Regulations. Jean-Guillaume’s commodity taxation and customs matters expertise are also recognized by the legal industry’s most prominent directories, including Chambers, Lexpert and The Legal 500.
Danielle Maor is an articling student at Stikeman Elliot.