Many Canadian import businesses have implemented remote working arrangements for employees as a result of COVID-19 government directives at the federal, provincial and municipal levels. Social distancing in business organizations can give rise to costly mistakes because business is not as usual. Importers have to adjust to the new normal and identify new (and existing) business risks. Most employees and managers are working from home, which means the control over information is diminished or non-existent. While there are hundreds of issues that arise in the remote working / teleworking environment, we are going to share our top ten list to get you thinking.
1. Record-keeping: In the remote working or teleworking environment, it is possible that employees are saving their work on a home computer or USB key, rather than a work computer or centralized server. As a result, when remote working ends, it may be that there are months of electronic documents that are not in their proper electronic databases. In the future, the CBSA may ask for these documents and they will need to be quickly located and produced. If important customs documents cannot be produced, the CBSA may impose a $25,000 fine.
Given that documents may be needed for a verification or audit, it is very important for importer employers to ask employees returning to the office whether they saved documents somewhere other than the centralized server. It is important to implement a written policy for import-related documents to be moved to a centralized electronic database so that the documents can be retrieved when needed in the future if a verification should be undertaken. This should be done as soon as possible. If key employees have to be terminated, it is important that they be required to provide any documents saved on home computers and to return all USB keys.
2. Missing Documents: In the remote working environment, employees may not have the same attention to detail when it comes to preparing, giving and receiving paperwork. For example, an employee may not ask for a Certificate of Origin, or a Certification of Origin on goods imported from a supplier in a free trade agreement country (e.g., the United States, Korea, the EU, etc.) and may claim preferential tariff treatment. The employee also may not ask for supporting documentation to justify the use of a particular H.S. Code (they might not verify the H.S. Code is even correct). The employee may not implement an effective filing method at home to ensure all documents are maintained. An employee may misfile documents.
As stated above with issue #1, given that documents may be needed for a verification or audit, it is very important for importer employers to ask employees returning to the office to bring all printed documents with them and to create a team to ensure all documents are in their proper files.
3. Failure to obtain government import and sale approvals: Canadian import companies may need a license to sell certain goods and should ensure that they know which licenses are required and obtain those licenses. For example, Canadian importers who have imported personal protective equipment (PPE) during the COVID-19 pandemic (such as masks, gowns, gloves and hand sanitizers) are required to have certain information from the vendors and have in place Health Canada licenses at the time of importation. Most importers of N95 masks, surgical masks, medical gowns (and other medical devices) must hold a valid Medical Device Establishment License (MDEL) issued by Health Canada. The MDEL license is issued for the activities of importing medical devices into Canada and selling them for human use in Canada. If the medical device is a Class II Medical Device (e.g., oxygen masks, gas masks, aerosol administration masks, gloves for examinations of patients), or a Class III and Class IV Medical Device, the importer may also need to obtain a Health Canada Medical Device License for the masks.
Hand sanitizers, antiseptic cleansers, disinfecting products, etc. are considered to be natural and non-prescription health products. Importers of hand sanitizer and antiseptic cleansers must have a valid Product License issued by Health Canada. The CBSA must approve of the formulation for the hand sanitizer before it can be imported so that risks to human health can be identified. The CBSA issues an approval after receiving a properly completed Request for Formula Approval form.
It is important that the license applications and the licenses be saved in a place that is accessible in the future. It is also important that all documentation related to the importation of the PPE be maintained.
4. Fraudulent Documents: During the COVID-19 crisis, many opportunists have surfaced to profiteer. If you have imported goods from a new foreign supplier, it is important to review the paperwork carefully because the fraudsters often have errors in their fraudulent documents. For example, a seller of fraudulent personal protective equipment (“PPE”) may provide paperwork showing that they have CBSA approval, but use “Canada Customs and Revenue Agency” on the paperwork – a government entity that has not existed for years. The exporter may provide Drug Identification Numbers (DIN) or Natural Health Products Numbers (NPN) that do not match the goods in the publicly available databases.
There is a risk that importers have received fraudulent documents from vendors and have provided the fraudulent documents to the CBSA or have relied on the information in providing information to customs brokers and on forms filed with the CBSA. The CBSA may impose administrative monetary penalties for providing false information and, in serious cases, may charge an importer with an offence under section 153 of the Customs Act. As a result, the importer needs to exercise proper due diligence when dealing with foreign sellers and exporters.
5. Errors made by customs brokers are not caught: The importer of record is responsible for errors made in customs documentation – not the customs broker. As a result, it is important to review information submitted to your customs broker and by your customs broker. Even in normal times, customs brokers can make mistakes. It is the obligation of importers to review the B3s and other filings and correct any mistakes.
In the tele-working environment, ongoing internal reviews of customs documentation should continue. If you have not been receiving copies of your B3s from your customs broker, there is no time like the present to start.
6. Reason-to-believe deadlines are missed: Canadian importers are required to correct errors within 90 days of a reason to believe that they have made a tariff classification, origin, or valuation error. If documentation provided to the CBSA is incorrect, it must be corrected within the 90 days statutory deadline. The deadline has not changed due to COVID-19.
7. Importation of Counterfeit Goods: Counterfeit goods are prohibited goods and cannot be imported into Canada. The CBSA will seize counterfeit goods and destroy them because they are not permitted in Canada. There have been many examples of counterfeit PPE, luxury items, electronics, car parts, etc. being imported into Canada.
When employees are working from home and they are approached by a new source of supply, it might be that the goods being offered are counterfeit.
8. Failure to obtain import permits: Employees may be forgetful to apply for and obtain import permits when working from home. It is possible that employees will forget to obtain an import permit before asking for goods to be shipped to Canada. As a result, when the goods arrive, they may be detained by the CBSA or the CBSA may charge a higher rate of duties.
A Canadian importer is permitted to import goods listed on Canada's Import Control List; however, the importer must have a valid import permit prior to importing the goods. Goods on Canada's Import Control List include:
- Military goods, firearms and weapons;
- Certain aluminum products;
- Certain chemicals;
- Certain steel products;
- Certain apparel goods and textiles;
- Poultry products;
- Certain eggs and chicks;
- Certain bovine (beef and veal) products;
- Certain pork products;
- Cheese products;
- Dairy products;
- Certain wheat, barley and malt products;
- Roses; and
- Textiles and clothing.
9. Confidentiality: Customs-related documents are generally confidential. The CBSA is prohibited from sharing an importer's customs documents with third persons. Remote working can exacerbate certain risks associated with the unintentional and intentional dissemination of confidential information by employees. Many importers do not want the public to know what they import, the valuation they use for the goods they import, the tariff classification they are using for their imports, the name of the supplier of the goods they import, whether they have any issues with the CBSA, etc.
(a) Employment Confidentiality: Many businesses have had to lay off and terminate employees during COVID-19. Some of those employees may go to competitors. Some of the employees may be angry. This is a time where companies may find employees taking information and sharing it with other people. As a result, it is important for companies to ensure employees sign confidentiality agreements that last for a necessary period of time.
(b) Security over Intellectual Property: Employees may not have proper security at home. Employees working from home may not have any firewalls in place and may work on a public or shared internet network, which is susceptible to hacking. Competitors and other third parties may access company information and steal it. Employees may print documents on home computers and may not have shredders. As a result, it is possible that sensitive company information is available at the curb on garbage day.
(c) Confidentiality over commercial/financial information: Customs documentation can contain very sensitive commercial and financial information. If your employees are working on a valuation, origin or tariff classification issue and communicating with the CBSA, there may be information that is very sensitive.
Employees might utilise automatic cloud storage features on home computers and smart phones and will inadvertently transmit/share confidential business information to servers unknown to and not controlled by the company.
(d) Access by third parties: Employees using computers at home that are shared with other persons in the household (that is, anyone in the household can access the information stored on the computer and anyone can send it to someone outside the household). Printed material might not be kept under lock and key in a filing cabinet.
Employees might download documents from the company server in order to work from home. Some employees might also remove security features from confidential protected documents. If any of these unprotected documents are saved on a home computer, stored remotely or shared, the company may no be able to detect such unauthorized access.
10. Not keeping up-to-date on new developments: Employees may not be working very hard while teleworking from home and may not keep up to date about CBSA published information (e.g., changes that will occur due to CUSMA coming into effect). As a result, the company may not have implemented required changes and may not be ready for developments in customs law.
Originally published 4 May, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.