COVID-19: Impacts on Canadian Customs and Trade Program
As Canadian importers and exporters have sought to navigate the trade flow disruptions caused by COVID-19, both industry and government have sought to develop policies and programs that facilitate urgent supply chain management. For industry, this has generally involved strategic contractual reviews and sourcing analysis, in order to assess the viability of current procurement relationships, as well as to seek out new partnerships, often in new jurisdictions.
The significant reduction in business activities resulting from the ongoing COVID-19 outbreak has left Canadian businesses with limited liquidity in the face of shrinking revenues. While Canadian borders have generally remained open to trade in commercial goods throughout the pandemic, Canada has continued to roll out customs programs administered by the Canada Border Services Agency (“CBSA”), designed to expedite trade and to help ease the significant financial strain on importers and exporters. Such programs have allowed importers to focus on other key compliance issues, and to either delay or eliminate altogether certain costs associated with the importation of goods.
At a relatively early stage in the pandemic, the importing community and various industry associations were particularly vocal in their requests for relief from certain customs compliance and payment obligations.
CBSA emergency COVID measures
The first administrative focus was to facilitate the importation of goods required to respond to the pandemic, that are imported by or on behalf of federal, provincial, municipal entities involved, such as health care facilities, along with first response organizations such as police, fire, and defence groups. Customs Notice 20-08 provides information on the relief of duty and taxes for such goods, pursuant to the Goods for Emergency Use Remission Order (C.R.C., c. 768) and the application of Tariff Item No. 9993.00.00 (temporary importations) of the Schedule to the Customs Tariff.
Next, the CBSA announced in Customs Notice 20-09 that the 90-day period for submitting corrections (following a CBSA trade compliance verification where errors were found) was automatically extended by 30 days, for a total of 120 days. This would allow importers to set aside correction obligations while they addressed more urgent scenarios. The CBSA announced on May 14 that trade compliance actions themselves, including verifications, have been suspended until further notice. Accordingly, trade compliance operations and interactions with importers and other stakeholders have effectively been put on pause since that date, without any further formal announcements about the potential resumption of these operations. We note, however, that it would appear that CBSA may be willing to recommence these activities at the specific request of importers who wish to resume verification and other compliance processes.
Importers also benefited from a 45 business days grace period in respect of late accounting penalties that applied to transactions released from March 11, 2020 to May 14, 2020, inclusively as per Customs Notice 20-10. Moreover, in late March, under the authority of section 33.7(1) of the Customs Act, the Minister of Public Safety and Emergency Preparedness and the CBSA announced the extraordinary step of extending the timeframes for the payment of duties and GST on imported products and amounts owed on re-assessments and penalties. Customs Notice 20-11, published on March 20, confirmed that the deadline for such payments was extended to June 30, 2020. Importantly, the extension does not affect the timeframes for import accounting currently imposed under the Customs Act and its Regulations. In other words, importers are still required to engage in their regular reporting activities with the CBSA in accordance with the usual timelines, although the associated duty and GST payments will not be due until June 30, 2020.
PPE customs and trade facilitation
In cooperation with other regulatory authorities such as Health Canada, the CBSA has also announced remission relief in connection with eligible personal protective equipment (“PPE”) goods. On May 6, 2020, the CBSA issued Customs Notice 20-19, which includes information on the Certain Goods Remission Order (COVID-19), under the Customs Tariff. The Order provides for the relief of customs duties for eligible COVID-related goods that were imported on or after May 5, 2020. Relief under the Order can be claimed at the time of importation, or within two years of the date of importation. Among other goods, the list of eligible PPE subject to this program include various face masks, protective garments, gloves, disinfectants / sterilization products, medical consumables, and the like.
In many of these cases, the Order will result in significant cost savings from a duties perspective. For example, textile material masks imported under tariff item No. 6307.90. are subject to 18% duties under the MFN tariff, but relieved from duty under the Order. This generates an 18% import cost savings for Canadian importers.
International programs of interest to Canadian importers and exporters
Other customs and border authorities have rolled out similar programs. U.S. Customs and Border Protection (“CBP”), for example, advised its trading partners that it will approve, on a case-by-case basis, extensions of time for payment of estimated duties, taxes, and fees. Specifically, pursuant to a Temporary Final Rule issued on April 22, 2020, the CBP regulations were amended to temporarily postpone the deadline for importers of record with a significant financial hardship to deposit certain duties, taxes, and fees that they would ordinarily be obligated to pay for merchandise entered in March or April 2020, for a period of 90 days from the date that the deposit would otherwise have been due.
While Canada’s border authority has been active in rolling out facilitation programs over the course of the pandemic, so too have global customs organizations. The World Customs Organization (“WCO”), for example, has launched a special section of its website to address customs-related COVID-19 issues. It has also issued reference guides for customs-pandemic issues such as PPE tariff classifications, and has provided guidance on how customs authorities can assist in the reduction in counterfeit PPE goods importation. Lastly, the WCO has noted that in response to the increase in imported counterfeit PPE, a number of jurisdictions have imposed export controls and medical device licencing framework that apply to the trade of such products.
At this juncture, it is unclear when the CBSA and other national border authorities will make additional adjustments to current COVID-19-related customs programs, or if there are more to come. It is likely that importers will continue to require the benefits under these programs as commercial relationships begin to regularize under various “re-opening” measures. That said, the time is now for importers and exporters to ensure that they are leveraging and are compliant with customs and regulatory programs that can help secure cost and time savings when they need it most. Accordingly, Canadian enterprises engaged in global supply chains should seek guidance on these fronts from their trusted advisors, and should implement applicable (and likely temporary) advantageous customs strategies.