As the final weeks of calendar-year 2024 draw to a close, we have highlighted some of the top trade issues impacting entities doing business in Canada and Canadian companies operating abroad. Businesses should continue to stay focused on trade compliance. We expect the developments noted below will occupy the time and attention of c-suite executives and trade compliance teams, alike.
Summer 2024 was busy with government initiated-consultations focused on economic resilience and national security. After the summer of consultation, fall implementation is here. New laws and policies have recently come into force, or will be coming into force during Q4 2024. Additionally, many of summer 2024’s consultations foreshadow changes that we expect will impact trade compliance into 2025.
Customs
CARM
After being postponed from its May 13, 2024, CARM Release 3 is scheduled for 3:00 AM EST on October 21, 2024, at which point it becomes the official system of record for imports into Canada. The CARM transition period is well underway with the CBSA requesting that importers withhold the submission of B2s starting September 1 until October 21, 2024, as outlined in Customs Notice 24-25. Information regarding the CARM transition period is outlined in Customs Notice 24-27. We are in the midst of a cutover period (October 5 to 21), during which imported goods will continue to be released, but accounting activities and the CARM Client Portal will be unavailable. Importer-specific information regarding the cutover period is available in Customs Notices here and for customs self-assessment (CSA) importers, here.
The CBSA has now released several onboarding guides (available here), which provide essential “how-to” information on CARM Client Portal functionality.
Importers relying on the CBSA’s Release Prior to Payment Program (RPPP) and are registered on the CARM Client Portal prior to Release 3 and will be automatically enrolled in the RPPP on October 21 and will have until April 19, 2025 (180 days) in order to post their financial security agreement.
Importers (non-CSA) can expect their first Statement of Account (SOA) to be issued on October 25, which will be due on October 31. The October SOA will include all B3s and payments submitted between September 25 and October 4 (the beginning of the CARM cutover period) and all CARM transactions submitted and processed between October 21 to 24, as per the CBSA’s directions in paragraph 23 of Customs Notice 24-29.
Valuation
The CBSA published their “what we heard” report on the proposed amendments to the Valuation for Duty Regulations, which purport propose a “last sale” approach to customs valuation (we write about it here). Based on the representations by the CBSA, the draft regulations published last year are being amended to clarify the wording, but the CBSA has not specified whether the regulations will be published again in draft for further public consultation, or will instead be published as final regulations in Part II of the Canada Gazette. These proposed amendments have the potential to increase the declared value for duty of imported goods, directly increasing duties and taxes owing, and indirectly increasing the cost of doing business in Canada.
Trade Compliance Verification Priorities
In July, the CBSA announced its renewed trade compliance verification priorities for 2024. We write about the new priorities in detail here. The most significant take-away is the CBSA’s novel addition of compliance priorities (e.g. verifications of TRQ use and classification of supply managed goods), alongside the CBSA’s historical focus on classification, valuation, and origin.
USMCA
The USMCA is up for review in 2026. Article 34.7 provides Canada, the US or Mexico, the opportunity to assess the operation of the agreement to ensure it remains current. Importantly, each party must confirm its agreement in writing to continue the USMCA by July 1, 2026. Failing agreement to continue the USMCA, the parties must conduct a joint review every year for the remainder of the current 16-year term that came into effect on July 1, 2020. Canada launched public consultations in August, which close on October 31, 2024. The government is seeking views on what is working well under the agreement and potential areas for improvement. This is an opportunity for Canadian businesses to express pain points under the existing agreement, which Canada could present during the 2026 review and possibly negotiate appropriate action.
Additionally, the United States has initiated consultations under Chapter 31 of the USMCA on Canada’s newly proposed digital services tax (DST) alleging breaches of Canada’s national treatment commitments under Article 15.3.1 (Chapter 15 – Cross-Border Trade in Services) and Articles 14.4.1 and 14.4.2 (Chapter 14 – Investment). Entities effected by the DST should closely follow this dispute. Consultations should be underway and may result in a resolution. However, failing a resolution, the US may request the establishment of a dispute resolution panel, whose decision will determine the fate of the DST. If successfully challenged, Canada may be required to modify, or perhaps repeal the DST.
Reporting on Country of Melt & Pour
On November 5, 2024, new country of melt & pour (COM) requirements under Canada’s Steel Import Monitoring Program come into force. The proposed amendments to General Import No. 80 (amendments) and General Import Permit No. 81 (amendments) were published on August 24 and comments were open until September 23. Although the Import Control List defines “carbon steel products” and “speciality steel products” broadly, there are certain products that are excluded from the COM requirements. Global Affairs Canada plans to update its Notice to Importers to address the COM requirements in the coming weeks and clarify the application of the exemptions noted in the amendments.
China Surtax Order
On October 1, 2024, the Government’s China Surtax Order implemented a 100% surtax on Chinese origin EVs (see the list here). The surtax will apply in addition to MFN tariffs that already apply to these Chinese-origin goods. The CBSA issued a Customs Notice detailing the application of the surtaxes, including how to determine origin, and how to calculate the application of the surtax when accounting for commercial importations.
In addition to this surtax, on October 15, 2024, the Government will apply a 25% surtax to importations of Chinese origin steel and aluminum products. After a brief consultation period, the Government published its final list of steel and aluminum goods subject to the surtax here. The Government continues to consider further surtaxes on Chinese origin goods, including semiconductors and solar panels. We write about the surtaxes further here.
While Canada mulls implementing further surtaxes, China has launched a novel “anti-discrimination investigation” regarding what it alleges to be discriminatory trade measures adopted by Canada against China. The investigation refers to the current surtaxes and the proposed future surtaxes against other Chinese-origin goods (e.g. semiconductors, solar panels, batteries, critical minerals). Similar investigations launched against Taiwan and the EU have resulted in the suspension of preferential tariffs, retaliatory tariffs or other import restrictions.
Forced Labour
Supply Chains Act
The next reporting period under Canada’s supply chain transparency legislation, the Supply Chains Act (SCA), opens on January 1, 2025. Published guidance has not been updated by Public Safety Canada (PSC) since March 2024 and certain ambiguities regarding the application of the legislation remains. However, PSC has indicated that new guidance will be issued in November 2024 that will address interpretive issues, such as whether the parent corporations of reporting entities are required to report by virtue of controlling a reporting entity. PSC’s current guidance is available here, and we expect that this version will be updated by PSC.
The first reports from the initial filing year are available on this portal and PSC’s first report to Parliament on the initial filing year under the SCA is available here. Although PSC accepted late reports in the initial filing year, reporting entities may not be able to take advantage of the same enforcement leniency for the May 31, 2025 filing deadline.
Positive Due Diligence Legislation
The Government’s policy promises in Budget 2023 and Budget 2024 included the introduction of new legislation to “eradicate forced labour from Canadian supply chains” and to “strengthen the import ban on goods produced using forced labour” by the end of 2024. The means for implementing this promise is widely believed to be the introduction of positive due-diligence legislation. As of October 17, the House of Commons has 37 sitting days to introduce new legislation.
The last Parliamentary acknowledgement of Budget 2024’s promise was in April 2024, in response to a question posed in the House of Commons where a representative of the Liberal caucus advised that they were continuing to advance the agenda set out in Budget 2024, without referencing any specific actions. The office of the Labour Minister reported that the Government is in fact working on new legislation, and has announced that this legislation will be introduced in Parliament by the end of 2024. The new legislation is reported to provide the CBSA with “new tools” to identify forced or child labour.
Enforcement of Import Prohibition
Canada has prohibited importations of goods mined or manufactured by forced labour under the Customs Tariff since July 1, 2020. The import prohibition was expanded to apply to goods mined or manufactured by child labour with the coming into force of the SCA on January 1, 2024. Draft revisions to the CBSA policy on the import prohibition was circulating in Fall 2023; however, the current policy has yet to be updated and remains under review.
Although some imports have been detained and investigated by the CBSA on the suspicion of forced or child labour (1 publicly reported), the CBSA has not released statistics regarding its enforcement of this import prohibition. Canada has drawn scrutiny regarding its scant enforcement of the import prohibition from US Member of Congress, whom have not only urged cooperation under the forced labour provisions of the USMCA, but suggested that forced labour be discussed during the USMCA joint review scheduled for July 2026.
Canadian Ombudsperson for Responsible Enterprise (CORE)
The CORE’s first “final report” was published in March 2024, which found misconduct by a Canadian mining company abroad. The first Ombud’s term ended in May 2024 and a new interim Ombud Masud Husain was announced. To date the CORE has not published a Q2 report on its ongoing operations. The last report (re Q1) was published on April 15, 2024, prior to Omsbud Meyerhoffer’s departure. The Government of Canada has foreshadowed undertaking a review of the CORE in the near future.
Sanctions
New sanctions evasion reporting obligations
Canada is relying on its existing AML legislative framework under the Proceeds of Crime, Money Laundering, and Terrorist Financing Act (PCMLTFA) and its administrative agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) alongside the CBSA to establish a sanctions civil enforcement regime in the form of mandatory reporting on suspected sanctions evasion for prescribed entities, importers, exporters and those financing import/export transactions. Since August 19, 2024, defined “Reporting Entities”, are required to report completed and attempted transactions where there are “reasonable grounds to suspect” a transaction is related to commission or attempted commission of a “sanctions evasion offence”. Additional reporting requirements will apply to importers and exporters and those financing import/export transactions under the PCMLTFA. The coming into force date has yet to be announced. We write about these amendments here.
Amending Existing Sanctions Regulations
Canada has continued to amend regulations over the summer introducing amendments to sanctions regimes in relation to Iran, Hamas and the West Bank (see additional updates here and here) and Belarus . Canada has also been reported to be considering implementing sanctions against certain Chinese companies involved in surveillance.
Delisting Applications
A significant decision was issued in August 2024, Makarov v. Canada (Foreign Affairs), 2024 FC 1234, where the Federal Court dismissed an application for judicial review in relation to the Foreign Affairs Minister Mélanie Joly’s decision to not recommend delisting Viktorovich Makarov from Canada’s Russia Regulations. In finding that the Minister’s Decision is reasonable, the Federal Court discusses the deference owed to the Minister’s weighing and assessing of the facts, including that reliance on what are described as credible and probative news articles was reasonable.
Enforcement & Guidance
In September, Australia, Canada, New Zealand, the UK, and the US (collectively, the E5) concluded their second annual enforcement conference and released a joint statement highlighting the key steps taken to tackle Russian circumvention of export controls and sanctions. A week later, the G7 issued joint guidance on preventing Russian export control and sanctions evasion, which we write about here. The guidance aims to assist the industry in identifying evasion tactics and in complying with multilateral export controls and sanctions.
The guidance serves as an excellent resource for Canadian businesses with heightened sanctions compliance risks and includes a high-priority list of items that pose a risk of diversion to Russia, a list of red flag indicators, best practices to address red flags, and resources for screening tools and guidance documents to assist with due diligence efforts. Canadian businesses should update their compliance policies to address sanctions evasion risks and exporters should expect increased trade control verifications by the CBSA, especially for goods destined to known transshipment hubs.
Export Controls
Export controls are entering the age of “plurilateral controls” as geopolitical forces disrupt traditional multilateral export controls agreements, like the Wassenaar Arrangement. In June, Global Affairs Canada issued a Notice to Exporters regarding regulatory amendments to the Export Control List (ECL) that were previously approved by an order-in-council (Order) on May 31, 2024 (Amendments). The Amendments target goods and technology in relation to quantum computing and advanced semiconductors, following similar unilateral amendments (or proposed amendments) to export controls implemented in the UK, France, Spain and Finland. We write about these amendments here.
In September, the U.S. Bureau of Industry and Security (BIS) followed suit and implemented export controls on quantum, semiconductor and additive manufacturing technology. We write about it here. Alongside these new controls, BIS created a license exception made available to countries that have equivalent controls on the same goods/technologies. To date, BIS has determined that ten countries are eligible under this license exception (Finland, Italy, United Kingdom, Australia, Canada, France, Germany, Denmark, Japan, Spain) for various controlled goods/technologies. Canada has yet to introduce an equivalent General Export Permits by regulation. Looking ahead, we expect that Canada will be introducing further unilateral export controls in the months ahead. During economic security consultations launched over the summer with a focus on economic security measures, Canada highlighted critical minerals as a sector where controls could be introduced.
