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______________________________________________________________________________Stewart McKelveyDoing Business in Atlantic CanadaCustoms Act and the Customs Tariff in order to properly account for the provisions of the EFTA and theAgricultural Agreements.Importing GoodsThe Customs Act establishes a self-assessment system under which all goods imported into Canadamust be reported to the nearest customs office. The applicable duties are calculated according to theprovisions of the Customs Tariff, which sets out a list of tariff provisions and establishes the rates ofcustoms duty applicable to the various tariff items. It is the importer’s responsibility to determine and paythe duties on the goods being imported. The importer is also required to report any errors made in thecalculation of such duties discovered within three years of the importation of the goods.In 2002, an Administrative Monetary Penalty System (“AMPS”) was put into place which authorizes theCanada Border Services Agency to assess graduated monetary penalties for infractions of Customslegislation. The penalties range from $100 to a maximum of $25,000 per infraction. The amount is basedon the type, frequency and severity of infraction. Importers with more than one infraction will receivepenalties of increasing amounts. The AMPS penalties largely replace the use of seizure and ascertainedforfeitures as enforcement tools. However, when an AMPS penalty is issued, seizure action may also beinitiated in specific circumstances. These may include instances where goods are prohibited orcontrolled. As well, the application of an AMPS penalty, or the use of seizure and ascertained forfeiture,does not preclude the option to prosecute. Criminal prosecution is available for more serious infractions,with maximum fines of up to $500,000 and maximum prison terms of five years.The tariff treatment accorded to goods under the Customs Tariff varies according to the nature of theitems and their countries of origin. Goods from some countries are given preferential treatment, includingthose countries participating in free trade agreements with Canada and certain developing countries.Special tariffs are also offered to certain goods originating in Commonwealth Caribbean countries,Australia and New Zealand.To ascertain the value of the goods being imported, and thereby the duties payable, a transaction valueapproach is used, in accordance with Canada’s obligations under the World Trade Organization’sGeneral Agreement on Tariffs and Trade 1994. The customs value of imported goods is the priceactually paid or payable for the goods when sold for export to Canada. That price is adjusted for a varietyof factors including transportation costs, royalty fees, handling fees and insurance costs. Other methodsof valuation are available if the transaction value cannot be used. There are also special rules whichapply when the importer and exporter are related parties.In addition to duties which may be payable under the Customs Act, the Excise Tax Act requires importersto pay Harmonized Sales Tax (“HST”) on the value of imported goods, although some goods areexempted from HST. The tax is payable in accordance with the Customs Act and becomes due at thetime the entry document for the goods is processed. Input tax credits on imported goods are available toHST registrants to the extent that the goods are for use in the registrant’s commercial activities.Import and Export ControlsThe Export and Import Permits Act requires that import permits be obtained for certain goods, such asdairy and poultry products, which are subject to import quotas. It also identifies certain goods which maynot be exported and certain countries to which exports are prohibited, except under the authority of exportpermits issued under the Act. It should be noted, however, that unlike the United States, there is noprohibition of trade with Cuba. Indeed, Canadian law prohibits Canadian subsidiaries of Americancorporations from complying with U.S. laws restricting trade with Cuba. American parent companies thattry to prevent Canadian subsidiaries from exporting Canadian goods and services to Cuba could findthemselves in breach of Canada’s Foreign Extraterritorial Measures Act, thereby exposing the Canadiansubsidiaries to penalties under that Act. Canada does, however, apply American export controls onAmerican goods bound for Cuba, in order to prevent Canada from being used as “goods launderer” byAmerican exporters seeking to avoid export controls applicable in the United States.Page 23