The Canada Border Services Agency (CBSA) proposes amendments to the Regulations to provide clearer direction to importers when determining which sale is to be used for assessing the value of their imports, with the intention of establishing a level playing field among all importers, while simultaneously reducing lost customs revenues to the Government of Canada in duties paid on lower VFD.
The proposed regulatory amendments would clarify which sale is to be used to calculate the duty on imported goods in order to address a regulatory gap that unduly benefits businesses located outside of Canada (NRIs) that ship goods to customers in Canada by (i) defining the term “sold for export to Canada”; and (ii) amending the definition of the term “purchaser in Canada”.
Currently, the term “sold for export to Canada” is not defined in the Customs Act. In 1997, the Valuation for Duty Regulations amendments came into force (SOR/97-443, Canada Gazette, Part II, Vol. 131, No. 20), giving effect to a definition of “purchaser in Canada” in the Customs Act. The intent was to prevent the undervaluation of imports by preventing the importer from using a sale between two foreign entities to value the goods, rather than the sale to a person in Canada.
While there is no definition of “sale” in the Customs Valuation Agreement, international consensus among World Trade Organization members was established at the World Customs Organization that the term “sale” is to be interpreted in its widest sense,footnote3 meaning the sale does not need to be concluded prior to the importation of the goods (i.e. not be restricted to a sales contract, but also include agreements to sell, which could be in a form of purchase commitments, purchase orders, intents to purchase or any other agreement that causes goods to be imported to Canada). More importantly, it was also agreed that the last sale to the buyer in the country of import, and not an earlier sale between two foreign entities, is to be used as a basis for determining the VFD (“last sale rule”).
The proposed regulatory amendments would:
EU commission has amended Regulation (EU) 2021/821 of the European Parliament and of the Council as regards the list of dual-use items. The list of dual-use items set out in Annex I to Regulation (EU) 2021/821 needs to be updated regularly in order to ensure full compliance with international security obligations, to guarantee transparency, and to maintain the competitiveness of economic operators. The control lists adopted by the international non-proliferation regimes and export control arrangements have been changed during 2022, and therefore Annex I to Regulation (EU) 2021/821 should be amended to include items subject to control under the Australia Group. In order to facilitate references for export control authorities and economic operators, Annex I to that Regulation should be replaced.
On 16 May 2023, the Commission welcomed the political agreement reached by EU Finance Ministers on new tax transparency rules for all service providers facilitating transactions in crypto-assets for customers resident in the EU. Fair and effective taxation is key to securing revenues for public investment and services, while creating a business environment in which innovation can flourish. However, tax authorities currently lack the necessary information to monitor proceeds obtained by using crypto-assets which are easily traded across borders. This severely limits their ability to ensure that taxes are effectively paid, which means European citizens lose important tax revenues.
This notice to exporters is a guidance note for companies to help them understand what they need to do to ensure they are complying with the Russia sanctions. The Russia sanctions regulations impose financial, trade, aircraft, shipping and immigration sanctions for the purposes of encouraging Russia to cease actions which destabilise Ukraine, or undermine or threaten the territorial integrity, sovereignty or independence of Ukraine. Trade sanctions seek to deny Russia access to the goods, technologies and revenue necessary to pursue its illegal war. The aim of this notice is to prevent the undermining of trade sanctions, export controls, and other restrictive measures designed and implemented in response to Russia’s invasion of Ukraine. Awareness of the risk and obligations in relation to sanctioned goods is an important first step for trade. Direct trade between the UK to Russia has fallen significantly since sanctions were introduced. However, Russia will seek to procure restricted goods via other routes. As such, there are risks around displacement of trade and diversion of goods to Russia. Traders should ensure that as part of their due diligence they consider these risks.
Ensuring Due Diligence
The true end-users of procured goods are unlikely to approach international suppliers directly or be named as end-users on paperwork. Instead, organisations often use a layered approach to conceal their procurement activities. Closer scrutiny of intermediary companies and apparent end-users can uncover discrepancies.
Strong due diligence on counterparties and internal governance in relation to sanctions is essential. Even on established counterparties, due diligence will need to be repeated at intervals to ensure that the risk has not changed; for example, change of directors/change of products traded, etc.
The procurement cycle below illustrates the different stages and types of entities likely used to acquire goods covertly. Not all stages may be used in every procurement attempt. Using this model, the end-user typically uses a ‘cover’ or ‘front’ company to request goods from networks of complicit intermediaries.
Key Risk Indicators
Risks need to be considered in the circumstances of individual companies and due diligence/internal governance tailored accordingly. These can be broadly grouped by customer, product and location. There are a number of initial risk indicators below. This list is not exhaustive and the examples below are intended to be indicative.