Changing Liability for Casual Imports…In the next year, CBSA (Canada Border Services Agency) will be changing how liability for duties and tax is assigned for imports of casual goods into Canada. While the date of implementation is not yet known, we do know that this will be a very big change with a lot of knock-on effects for brokers and non-commercial importers.
Casual Goods, sometimes referred to as personal goods, are goods that are not going to be used for commercial purposes. These are different from Personal Effects, which are goods that are already owned by the importer and which are being brought into Canada for their use, for example, when someone moves to Canada and brings their household goods.
Casual goods are purchased from another country and imported into Canada for the first time.
Personal effects must be accounted for by the importer, while casual goods can either be accounted for by the importer or by a customs broker working on their behalf.
When a customs broker submits a declaration to CBSA, the importer is identified by their business number. A casual importer wouldn’t have a business number – by definition, they are not a business – so when a customs broker submits a declaration on behalf of a casual importer, they use their own business number. It has always been understood that, even when a broker’s business number appears on a declaration for casual goods, the purchaser is still the Importer.
The Importer of Record (IOR) is the party who is legally responsible for ensuring goods are correctly accounted for and all applicable duties and taxes are paid. The IOR also has a responsibility to correct any errors in past declarations for up to four years after the import.
This understanding was codified in January 2020 when a case was brought before the Canadian International Trade Tribunal. A customs broker had processed a number of casual imports for various importers and a re-determination by CBSA had found that the goods had been classified wrongly and duty was now owing on the imports. The CITT ruled that, even though the customs broker’s business number was on the declarations, they were not liable for the missing duty.
This was very welcome news for customs brokers. Because brokers generally do not see the goods they import, they have no reliable way to ensure that the information they are provided by their clients is accurate. Brokers have to trust that their clients are giving them correct information.
The CITT ruling was less warmly received by CBSA. It created a loophole: if duties or taxes were left outstanding on a casual import, CBSA couldn’t pursue the party whose legal information was on the declaration.
On June 23, 2022, Parliament passed a new law closing that loophole. The Customs Act will now state that “The entity that declares itself the commercial importer on accounting documents is jointly and severally liable with the owner and importer of the goods for duties and taxes.”
This means that customs brokers who use their own business numbers for their clients’ casual imports will be legally considered the joint importers of those shipment. It also means that those customs brokers will now be liable for any duties or taxes on those imports that aren’t paid by their clients for up to four years after the import. If an importer misdeclares or under-declares a personal shipment, their broker could have to pay the difference. Understandably, this has made the customs brokerage community a little nervous.
The new law has not yet come into effect and no launch date has been announced. CBSA will recommend an implementation date to the governor and council. In preparation, they are holding exhaustive consultations with stakeholders including brokers, importers, couriers, consumers, freight forwarders and e-retailers, among others. It seems likely that the law would be brought into effect to coincide with the launch of CARM this October, but that has not yet been decided.
It’s not yet clear exactly how the new liability rules will work. CBSA has acknowledged that the purchasers of casual goods will still be considered the importers of their shipments, even though their customs brokers will also be the importers of record. This might require creating a new category of importer; provisionally, in consultations with the trade community, CBSA officials have been using the term True Importer to distinguish between the party actually purchasing the goods and the IOR.
CBSA has yet to address many of the challenges that will be raised by having a commercial entity act as the IOR on all casual shipments. For example:
• How will PST be collected?
• If every shipment functionally becomes a commercial import, how will CBSA even know which imports are required to pay PST?
• Certificates of origin are not required for shipments of causal goods, but if every shipment is going through a commercial IOR, will casual importers now be required to obtain certificates or else pay duty?
• Casual importers are currently allowed to bring in a 90-day supply of medication for their personal use; is that allowance going to end? With a commercial IOR attached to the entry, an importer normally wouldn’t be able to bring in any medication at all without a license.
One effect of the change in liability will likely be that customs brokers will need to be more careful about declaring casual imports. Brokers may start requiring very complete and specific documentation for personal shipments going forward. However, at the end of the day, brokers have no real ability to ensure compliance by their clients.
The broker-client relationship is based on mutual trust, and brokers have to rely entirely on their clients for an accurate accounting of their goods. As the legislative change is currently proposed, any broker who declares a casual shipment will be accepting the risk that they will be left fully liable for any duties and taxes if their client fails to pay.
Because of this, it’s also very likely that some brokerage firms will opt not to handle personal shipments under their own business numbers anymore, and a restricted supply of brokers willing to process those shipments could drive up prices. Canadians wanting to import goods for their own personal use might face more difficulty finding a broker willing to handle their import and higher prices for brokerage.
The real results of this change will depend on how CBSA decides to handle the new legislation, and for now the trade community will have to wait for more information.
By Robin Smith, M.A., CCS
– Robin is a trade industry professional based in Victoria, BC.
In the next year, CBSA (Canada Border Services Agency) will be changing how liability for duties and tax is assigned for imports of casual goods into Canada. While the date of implementation is not yet known, we do know that this will be a very big change with a lot of knock-on effects for brokers and non-commercial importers.
Casual Goods, sometimes referred to as personal goods, are goods that are not going to be used for commercial purposes. These are different from Personal Effects, which are goods that are already owned by the importer and which are being brought into Canada for their use, for example, when someone moves to Canada and brings their household goods.
Casual goods are purchased from another country and imported into Canada for the first time.
Personal effects must be accounted for by the importer, while casual goods can either be accounted for by the importer or by a customs broker working on their behalf.
When a customs broker submits a declaration to CBSA, the importer is identified by their business number. A casual importer wouldn’t have a business number – by definition, they are not a business – so when a customs broker submits a declaration on behalf of a casual importer, they use their own business number. It has always been understood that, even when a broker’s business number appears on a declaration for casual goods, the purchaser is still the Importer.
The Importer of Record (IOR) is the party who is legally responsible for ensuring goods are correctly accounted for and all applicable duties and taxes are paid. The IOR also has a responsibility to correct any errors in past declarations for up to four years after the import.
This understanding was codified in January 2020 when a case was brought before the Canadian International Trade Tribunal. A customs broker had processed a number of casual imports for various importers and a re-determination by CBSA had found that the goods had been classified wrongly and duty was now owing on the imports. The CITT ruled that, even though the customs broker’s business number was on the declarations, they were not liable for the missing duty.
This was very welcome news for customs brokers. Because brokers generally do not see the goods they import, they have no reliable way to ensure that the information they are provided by their clients is accurate. Brokers have to trust that their clients are giving them correct information.
The CITT ruling was less warmly received by CBSA. It created a loophole: if duties or taxes were left outstanding on a casual import, CBSA couldn’t pursue the party whose legal information was on the declaration.
On June 23, 2022, Parliament passed a new law closing that loophole. The Customs Act will now state that “The entity that declares itself the commercial importer on accounting documents is jointly and severally liable with the owner and importer of the goods for duties and taxes.”
This means that customs brokers who use their own business numbers for their clients’ casual imports will be legally considered the joint importers of those shipment. It also means that those customs brokers will now be liable for any duties or taxes on those imports that aren’t paid by their clients for up to four years after the import. If an importer misdeclares or under-declares a personal shipment, their broker could have to pay the difference. Understandably, this has made the customs brokerage community a little nervous.
The new law has not yet come into effect and no launch date has been announced. CBSA will recommend an implementation date to the governor and council. In preparation, they are holding exhaustive consultations with stakeholders including brokers, importers, couriers, consumers, freight forwarders and e-retailers, among others. It seems likely that the law would be brought into effect to coincide with the launch of CARM this October, but that has not yet been decided.
It’s not yet clear exactly how the new liability rules will work. CBSA has acknowledged that the purchasers of casual goods will still be considered the importers of their shipments, even though their customs brokers will also be the importers of record. This might require creating a new category of importer; provisionally, in consultations with the trade community, CBSA officials have been using the term True Importer to distinguish between the party actually purchasing the goods and the IOR.
CBSA has yet to address many of the challenges that will be raised by having a commercial entity act as the IOR on all casual shipments. For example:
• How will PST be collected?
• If every shipment functionally becomes a commercial import, how will CBSA even know which imports are required to pay PST?
• Certificates of origin are not required for shipments of causal goods, but if every shipment is going through a commercial IOR, will casual importers now be required to obtain certificates or else pay duty?
• Casual importers are currently allowed to bring in a 90-day supply of medication for their personal use; is that allowance going to end? With a commercial IOR attached to the entry, an importer normally wouldn’t be able to bring in any medication at all without a license.
One effect of the change in liability will likely be that customs brokers will need to be more careful about declaring casual imports. Brokers may start requiring very complete and specific documentation for personal shipments going forward. However, at the end of the day, brokers have no real ability to ensure compliance by their clients.
The broker-client relationship is based on mutual trust, and brokers have to rely entirely on their clients for an accurate accounting of their goods. As the legislative change is currently proposed, any broker who declares a casual shipment will be accepting the risk that they will be left fully liable for any duties and taxes if their client fails to pay.
Because of this, it’s also very likely that some brokerage firms will opt not to handle personal shipments under their own business numbers anymore, and a restricted supply of brokers willing to process those shipments could drive up prices. Canadians wanting to import goods for their own personal use might face more difficulty finding a broker willing to handle their import and higher prices for brokerage.
The real results of this change will depend on how CBSA decides to handle the new legislation, and for now the trade community will have to wait for more information.
By Robin Smith, M.A., CCS – Robin is a trade industry professional based in Victoria, BC.
