In the next twelve months, Canada will continue to pursue multiple different priorities on the international trade and geopolitical front. With the global resurgence in industrial and protectionist policy and a continued focus on supply chain regulation and sanctions, we anticipate that 2024 will continue to be a significant year for trade. These developments form part of geopolitical risks in international business that  businesses and General Counsel need to internalize and appreciate as they navigate this quickly evolving landscape.  

Here are some of the highlights:

1. CARM

The long-awaited Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) digital initiative will profoundly change how CBSA assesses and collects duties and taxes on commercial goods imported into Canada. The current plan is for CARM to become the official system of record that importers must use to pay duties on May 13, 2024.

According to the CBSA, CARM will simplify the overall importing process and is touted as providing a modern interface for importing into Canada, self-service access to an importer’s own information and as enhancing compliance with trade rules.

When CARM is implemented the customs coding (B3) and request for adjustment (B2) forms, in use for decades, will disappear and be replaced by a new commercial accounting declaration (CAD). Importers and their trade chain partners (like customs brokers) will be able to submit, correct or adjust the CAD via a CARM Client Portal or electronic data interchange (EDI), or an application programming interface (API).

The CBSA has been actively engaging in extensive consultations on the implementation of CARM and industry has expressed a long list of concerns regarding the implementation of CARM. Consultations continue to be open with the latest feedback period open until April 3, 2024. Concerns and questions can be addressed to the CBSA at CBSA.CARM_Transition-Transition_GCRA.ASFC@cbsa-asfc.gc.ca.

Necessary regulatory changes have, among other things, been the subject of hearings by the House of Commons Standing Committee on International Trade (CIIT) to which the industry has addressed numerous briefs expressing concerns about the proposed implementation of CARM. These concerns have included inadequate collection of duties on parcel imports, surety bonds for GST on imports, lack of clear guidance on payments and accounting, lack of clarity in accounting procedures, operation gaps and complexity of the system, unnecessary barriers for non-resident importers and lack of demonstrated technology readiness. The industry briefs are available here: https://www.ourcommons.ca/Committees/en/CIIT/StudyActivity?studyActivityId=12563365.

We predict that as CARM is rolled out some of the concerns of industry will come to a head and implementation issues will arise. We strongly encourage clients, if they have not already done so, to appoint a CARM lead within their operations and to ensure they are ready when implementation date arrives in May. This includes ensuring that you have the appropriate financial security agreements in place. Given the transformation changes required by CARM and the number of importers that have yet to put their financial security in place there is potential for back log and delays around getting the appropriate financial security in place. This may impact the release of goods prior to payment when CARM goes live.

In addition, we strongly suggest that any corrections that may need to be filed are done before they can only be done via CARM. Given the potential for issues during CARM’s role out getting any customs corrections done before they must be done on CARM is a prudent step to take.

Alongside CARM, the Canada Border Service Agency is currently reviewing a large number of D-memoranda. This includes the following:

• D8-1-1: Administration of Temporary Importation Regulations;
• D17-1-5: Accounting for Commercial Goods;
• D17-1-8: Release Prior to Payment Privilege;
• D17-1-10: Coding of Customs Accounting Documents;
• D17-2-1: Adjusting Commercial Accounting Declarations; and
• D17-2-4: Preparation and Presentation of Pre-CARM Adjustments.

Parties have until April 3rd to share their comments on the draft Canada Border Services Agency D-memoranda.

2. Forced/child labour in supply chains reporting obligations

In 2023, Canada joined the growing list of countries imposing forced/child labour in supply chains reporting obligations. The first mandatory reports under the Fighting Against Forced Labour and Child Labour in Supply Chains Act are due on May 31 of this year. Canadian reporting entities are currently gearing up to file by the due date and many challenging interpretive issues have emerged, among others, on the scope of application of the Act, the level of detail required in the reports, and whether reports used in other countries adequately meet Canadian requirements. We anticipate that as the May 31 deadline approaches, more reporting entities will require guidance and assistance in submitting their first reports. Then, after May 31, a new phase will begin. We anticipate that Public Safety will approach enforcement in a measured fashion, focusing on education and encouraging compliance, rather than seeking to impose any penalties on non-compliant companies.

3. Trade remedies: Vigorous enforcement of anti-dumping orders

In 2023, we observed the imposition of retroactive anti-dumping duties on imports of certain steel commodities. These can be imposed by the CBSA when margins of dumping and exporter normal values are reviewed during the five-year duration of an anti-dumping duty order. In the context of a reinvestigation or normal value review, where the CBSA concludes that an exporter failed to notify the CBSA of material changes in economic conditions, retroactive duties can be imposed at revised, higher rates. Previously, retroactive anti-dumping duties were very rarely imposed but the CBSA appears to be taking a much stricter approach, which has resulted in extremely large and prejudicial duty liabilities for importers, long after the goods initially cleared through customs. This stems from a policy change in 2018 relating to company normal value reviews that is now reflected in D memorandum 14-1-8.

In 2024, we expect the CBSA’s vigorous enforcement of existing anti-dumping orders to continue and anticipate that more retroactive duties will be imposed, particularly in relation to high value steel product imports. Importers of commodities subject to anti-dumping orders should be mindful of the risk of retroactive duties and exporters should be careful to notify the CBSA of any material change in their costs or other relevant changes to the economic conditions under which they operate. As appropriate, guidance from expert trade counsel should be sought.

4. Sanctions

Sanctions, particularly in relation to Russia’s invasion of Ukraine, continue to be very dynamic. Under its sanctions against Russia, Canada has now designated 1,410 individuals and 628 entities facing a broad dealings ban. In the year ahead, it is reasonable to expect that more individuals and entities will be sanctioned in connection with Russia’s invasion of Ukraine.

Also in connection with Russia sanctions, legal proceedings continue seeking to liquidate frozen sanctioned person assets. Canada has stated that it wishes to liquidate these assets in order to use the funds to assist Ukraine. If initial proceedings are successful, we expect that the Government of Canada will continue to use available mechanisms to liquidate frozen assets of sanctioned Russian persons.

In the year ahead, we expect that Canada will continue to vigorously use sanctions to advance it geopolitical interests, whether in relation to Russia, Iran, China or other countries. Canada recently imposed sanctions for the first time against certain individuals in Guatemala that Canada considers have engaged in corruption and gross and systematic violations of human rights. We anticipate that Canada will continue to use these kinds of sanctions as a tool for advancing its international priorities and geopolitical interests.

For more information on this topic, please reach out to the co-authors, Paul Lalonde and Sean Stephenson.

To read other articles in the Dentons’ Pick of Canadian Regulatory Trends to Watch in 2024 series, click here.

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