Importers, intermediaries and third-party logistics providers that are involved in the import of e-commerce goods into Canada may be affected by upcoming changes to the Customs Act. Under these measures, intermediaries and third-party logistics providers may also be responsible for duties and taxes related to these shipments, along with owners and importers.
Although these changes are not yet in force, affected businesses should review their current business arrangements to evaluate the potential impacts of these new measures and implement any necessary updates. Importers, intermediaries and third-party logistics providers involved in the import of e-commerce goods should also note that these new measures could also affect their federal and provincial tax collection and remittance obligations.
Background
Under the upcoming changes to the Customs Act, certain businesses that will now qualify as the “importer of record”, a newly defined term, may be liable to pay duties and taxes on e-commerce goods, along with the owner of the goods at the time of release, and the importer or person authorized to pay the duties. The importer of record is defined as the person identified as the importer when the goods are accounted for under the Customs Act (i.e., generally when import duties and taxes are calculated and paid). As a result, the intermediaries and third-party logistics providers that qualify as importer of record will also be liable for duties and taxes payable at the time of customs accounting or from post-entry audit reassessments on certain shipments. These rules are scheduled to come into force on a date to be fixed by order of the Governor in Council.
These changes were included in Bill C-19, which received Royal Assent on June 23, 2022. These measures follow a 2020 decision where the Canadian International Trade Tribunal (CITT) found that an e-commerce intermediary was not liable for post-entry duty reassessments issued by the Canada Border Services Agency (CBSA) for shipments the intermediary released and accounted for on behalf of non-commercial casual importer clients.
Impact on Canadian resident and non-resident businesses
Canadian and foreign intermediaries and third-party logistics providers that assist with the imports of e-commerce goods into Canada may be jointly and severally, or solidarily liable to pay duties and taxes on these shipments under the new measures. As a result of the expanded importer liability, businesses may see an increase in post-entry compliance verifications, particularly around the valuation of imported goods. Intermediaries and third-party logistics providers may also see such an increase in post-entry reviews, even for transactions where they are not directly involved in the sale and the determination of the value of the imported goods. In addition, these changes may create greater uncertainty regarding which party (i.e., the importer, owner or intermediary) may be entitled to obtain refunds and credits for duties and taxes paid.
We can help
KPMG’s Trade and Customs professionals can assist Canadian resident and non-resident importers, intermediaries, and third-party logistics providers to:
- Undertake a comprehensive review of their transactional structure to better understand how the import liability expansion may impact their business and clients and develop mitigation strategies
- Assess possible implications in other areas of tax resulting from these changes to the Customs Act.
For more information, contact KPMG’s Trade and Customs team or one of the following professionals:
Kenn Jordan
Partner, Trade and Customs
1 416 476 2257
kejordan@kpmg.ca
Joy Nott
Partner, Trade and Customs
1 416 228 7175
jnott@kpmg.ca
Bob Sacco
Executive Director, Trade and Customs
1 416 777 3693
bobsacco@kpmg.ca
Angelos Xilinas
Partner, Trade and Customs
1 604 691 3479
axilinas@kpmg.ca
Information is current to September 26, 2022. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500
