The Views of Canada’s Customs Brokers: Liability Imposed as the Importer of Record Under Proposed Changes to the Customs Act The Issue The proposed amendments to

Section of the Customs Act mean that if a customs broker uses their business number (BN) to facilitate release and accounting of “casual goods in the commercial stream”, they become the Importer of Record and are jointly and severally liable for duties and taxes with the importer or owner of the goods. This use of the broker’s business number is done today as a way to facilitate release and accounting for casual goods (goods sent to individual consumers). The broker is not currently liable for duty and tax obligations, and has no title to the goods.

There are various business models generally referred to as “e- commerce”, and one example is clearing multiple shipments to individual consumers from a vendor such as a catalogue company. There was no consultation with key stakeholders before this proposal was drafted. The details of implementation must be the subject of transparent and responsive collaboration to identify risks and consequences. Canada’s customs brokers are most affected by this change, and have the most to offer to mitigate risk associated with this decision.

The Role and Value of Customs Brokers The existence of customs brokers not only allows governments to allocate scarce resources more efficiently, it also saves governments money. There are many examples of how customs brokers represent a net transfer of costs from the public to the private sector by taking on functions like data entry and management, and communicating information about complex regulatory requirements to thousands of clients.

Customs brokers are uniquely placed to help Customs administrations achieve improvements, including efficiencies in the application of regulations, development of programs that optimize the use of technology, and support for the application of supply chain security standards. In many countries of the world, including Canada, customs brokers are seen as the original “trusted traders”, regulated by government through such things as security background checks, review of financial viability and examination of expert knowledge.

Commentary A broker may use their BN to facilitate trade between a foreign entity that has sold consumer goods to a private Canadian citizen (the casual importer). The entity could be a well known retailer such as Lands End, LLBean, Digi-Key, or it could be a platform seller, such as Amazon, eBay, or Ali-baba where the platform “hosts” individual sellers or retailers to enable them to sell to individual consumers. In this world known as “e-commerce”, business has adapted to consumers’ needs/wants, and volumes of transactions have increased exponentially worldwide, and continue to do so.

In these models, the foreign entity, which could be a small, medium, or large global business is not the importer of record, they do not have a BN and have no plans to obtain one. In addition, it is difficult for the casual importer, or consumer to receive a BN from the Canada Revenue Agency (CRA). The foreign entity advises the consumer that they have arranged for the customs clearance and the customs broker is predetermined. The customs broker makes a business decision to use their BN.

The customs broker provides this service for a variety of reasons: - to facilitate trade, since they are the only supply chain partner with security in the form of a casual Business Number; - business and consumers want a seamless process that delivers goods quickly and efficiently; - consumers are not equipped to do this work; - the CBSA cannot process such a high volume of transactions by individual consumers.

In the future, under this amendment, a customs broker that accounts for non-commercial goods using their non-commercial importer BN will be the Importer of Record and is jointly and severally liable for duties and taxes with the importer or owner of the goods. Practically speaking this means that the customs broker would be liable for the duties and taxes for four years including any duties and taxes owing as a result of a verification audit. Concerns 1. Although the current legislative proposal is focused on

Section 17, liability for duty and tax, the liability is not limited to the initial transaction and payment. Duty and tax can be reassessed, and verification audits can be conducted up to 4 years after the initial transaction. Assuming this liability on behalf of individual consumers represents considerable risk for customs brokers. 2. If the goods are misdeclared – by description, value or origin - the customs broker, who has no relationship with the individual consumer, would be liable. In fact, the customs broker is the last entity that would know that an error has been made.

If the foreign entity provides a commercial invoice it is that document that is relied on. The consumer may be aware of the error when they receive the item, but a customs broker would not. 3. No legislation is in place to penalize a consumer with a monetary penalty under the commercial process (such as CBSA’s Administrative Monetary Penalty System, AMPS). 4. We don’t believe there is an appetite by the CBSA to penalize a Canadian citizen for an error made by the foreign entity. 5.

If there is liability for duty and tax, the risk assessment by customs brokers of continuing to offer this service is likely to result in a withdrawal of this service option by some of them. We would anticipate long line-ups at the border, as thousands of individual parcels for consumers would need to be processed for release without this facilitative mechanism. 6. Refunds and returns are a significant problem today for these consumer goods and there needs to be clear authority and processes developed to manage these. 7.

We always support standardized approaches to processes for managing the movement of goods across borders, regardless of mode of transport. Fairness in facilitation is crucial. About the Canadian Society of Customs Brokers (CSCB) Canada’s customs brokers contribute to the security of our borders while facilitating the movement of low-risk goods across those borders. Customs brokerage companies are licensed by the Canada Border Services Agency and act with legal authority on behalf of Canadian importers and exporters.

We are constructive participants in consultative bodies which inform CBSA and other agencies’ policies and processes, including the Border Commercial Consultative Committee. We are committed to building the knowledge base of those involved in customs and border management, with more than 1,000 people each year from all parts of the supply chain registered in our e-learning programs, and more than 5,000 people holding our professional designations.

In addition to representing and providing services to customs brokers and their clients in Canada, the Canadian Society of Customs Brokers (CSCB) is also well positioned globally. We act as the Secretariat for the International Federation of Customs Brokers Associations (IFCBA) with members in all regions of the world, and have engaged in capacity building projects on customs modernization in Asia, Africa and the Americas on behalf of the World Bank, the World Customs Organization and the Global Alliance for Trade Facilitation.

We have a very close relationship with our United States and Mexican counterparts, with our three associations forming the North American Customs Brokers Alliance (NACBA). We were invited to join the Private Sector Consultative Group (PSCG) of the World Customs Organization when it was formed, and have continued to contribute to its work since then, including as chair of the PSCG for three terms. We are aware of and endeavour to influence global best practices. For more information, contact: Carol West President & CEO Canadian Society of Customs Brokers cwest@cscb.ca