Sunday , May Sun , 2011
KWE CANADA COMPLIANCE

MEMO  2011 .IV

1. Mexico to Join in the A.T.A. Carnet System. On 16 May, 2011, Mexico will join 70 other countries around the world in accepting the A.T.A. (Admission Temporaire/Temporary Admission) Carnet.  A carnet is a sort of "goods passport"—an international customs document allowing the holder of it to enter goods into a country without payment of any duty or tax, on the solemn promise that those goods are not for consumption and will be exported within a prescribed time.  The large economy of Mexico and its geographic position make it an important international trading partner; and use of the A.T.A. Carnet to introduce goods there will reduce formalities, facilitate the movement of those goods and save companies which show their goods at business fairs and conventions bond fees and many other customs costs.

2. B13A, Export Declaration. The form used to document the export of goods from Canada has been updated recently: see Form B13A.

3. Re-investigation of "Normal Values" for Certain Carbon Steel Fasteners (Screws). On 29 April the Canada Border Services Agency (CBSA) initiated a re-investigation of export prices and normal values with respect to certain carbon steel screws originating in or exported from the People's Republic of China or Taiwan. Manufacturers/exporters of subject products are strongly advised to provide all the information requested by the CBSA in its Exporter Request for Information (RFI). Importers of the subject goods are well-advised to contact their suppliers and require, if possible, that the RFIs be complied with fully. The alternative is daunting: goods from manufacturers/exporters which are not co-operative in providing the information requested under the CBSA RFI will be assessed anti-dumping duty according to the so-called "ministerial specification" which, in this case, is 170%.

For a general overview of anti-dumping and countervailing duties and the anti-dumping and countervailing duty process, please see KWE Compliance Memo 2011.III, article 4.

4. Customs Brokerage Services & the GST/HST/QST. All customs brokerage services are taxable at one or another of the various full GST/HST (or GST plus QST) rates. However the place of supply rule—used to decide in which province a supply is provided and so which tax rate is applicable—is different, depending on whether the customs brokerage service (1) is supplied with respect to a particular import entry of goods or (2) is supplied otherwise (for example, for making a drawback claim, a refund, an appeal, a notice of objection, etc). As noted passim in these memoranda, if the customs brokerage service is one of "arranging for the release of imported goods or of fulfilling, in respect to [that] importation, any requirement under the Customs Act or the Customs Tariff to account for [those] goods, to report [them], to provide information or to remit any amount [with respect to them]", the province into which the goods are released is deemed to be the place of their supply.  On the other hand if the customs brokerage service is supplied without respect to any particular import entry of goods, the place of supply is (generally speaking) the (nearest) location of the recipient of the supply.

The place of supply rules may be are different depending on the nature of the customs brokerage service that is supplied but that does not change the fact that all customs brokerage services are taxable. So, for example, a charge made for Release on Minimum Documentation (RMD)—nowadays an almost entirely obsolete service—is a taxable charge; a charge for ACI-eManifest transmission is a taxable charge; a charge for "Forms and Docs" is a taxable charge; and so on. Tax cannot be evaded (or uncollected) merely by the ruse of fracturing a customs brokerage fee into its component parts, and charging out and collecting the full HST (or GST plus QST) only on the "brokerage" component, while not charging out (nor collecting) tax on any or all of the other charges associated with arranging release of and accounting for imported goods.

5. End-Use Tariff Codes and CBSA Audits. Importers that import products for an end-use set out in a Tariff Code in Chapter 99 of the Customs Tariff are well-advised to use the Tariff Code even if those products enter Canada under a duty free 10 digit classification number.  In an audit the CBSA may change a classification from a duty-free provision to one that is dutiable and it, rightly, will not undertake to ascertain whether the products it may make dutiable might qualify as duty free under an end-use Tariff Code. It is not proper for the CBSA, in the absence of any declaration to such effect, to initiate discovery of an end-use to which the importer may or may not put a product.

But in our estimation it is a very different case if those products are, at the time of the CBSA audit, already classified with an end-use Tariff Code attached. If a Tariff Code is attached to the 10 digit classification number that the CBSA wants to change, the CBSA cannot unilaterally—without asking the importer for confirmation of end-use—strike off the end-use Tariff Code or otherwise pretend that that end-use has not been declared. Of course it could be that a particular tariff code is only available to goods that are classified in a certain way and that in changing the 10 digit classification the CBSA effectively makes that Tariff Code unavailable, a priori, so to speak. But such would be a special case; and in the main we suggest that if the Tariff Code is attached to a 10 digit classification number the CBSA could not just change the 10 digit classification without discovering the propriety of the use of the end-use Tariff Code and requiring, if use of the Tariff Code is found to be in order, that that Tariff Code be attached to the CBSA-changed 10 digit classification number.

The CBSA policy as it stands now is to provide the importer with its preliminary audit report and allow the importer 30 days within which to petition for changes, including changes such as attaching end-use Tariff Codes to 10 digit classification numbers.  But this remedy strikes us as too paternal, and trusting, and ultimately not nearly as good as making sure applicable end-use Tariff Codes are always declared, even when the goods enter Canada under a duty free classification number.