A member of the Canada Border Services Agency speaks with travelers crossing the U.S.-Canadian border in Blaine, Wash., on Aug. 9, 2021.David Ryder/Reuters
Laura Dawson is executive director of the Canada-U.S. Future Borders Coalition.
Ann Penner is part of Wellington Advocacy’s trade practice and a former member of the Canadian International Trade Tribunal.
We applaud Treasury Board President Anita Anand for reviving the Regulatory Co-operation Council (RCC) as part of a Team Canada approach to strengthening Canada-U.S. trade. Non-tariff barriers continue to be one of the insidious factors undermining trade competitiveness, raising prices for consumers and keeping small business out of the market. She was right to note that “business just wants to do business and we need to make it easier for them to get it done.”
But, even as the federal minister is working on greater regulatory co-operation, other parts of the Canadian government are headed in the wrong direction. The Canada Border Services Agency (CBSA) is proposing regulations that will change how it calculates the value of every good imported into Canada. Why? According to CBSA, to level the playing field for Canadian importers regarding their international counterparts and to raise additional revenue for the government.
To be sure, the CBSA’s valuation for duty (VFD) regulations will certainly raise hundreds of millions of dollars in tax revenues. Indeed, they will give the CBSA the ability to inflate the value of imports, and the corresponding duties owed by importers, i.e. Canadian businesses and consumers. But they will not level the playing field as the playing field does not need to be levelled on this issue.
The effects of the CBSA’s proposed VFD regulations will be significant. Why? First, they will artificially increase the value of imports, leading to higher costs for Canadian businesses and consumers at a time when they are grappling with an affordability crisis. Second, compliance will involve a costly and complex process of calculating the value of imports at the border (another way to push small businesses out of the market and decrease Canada’s trade competitiveness over all). Third, the regulatory processes are markedly different from those used in the United States and other trading partners.
As such, CBSA’s proposed VFD regulations seem diametrically opposed to regulatory co-operation, which is intended to support Canadian traders and strengthen Canada’s position in the upcoming 2026 review of the United States-Mexico-Canada Agreement (USMCA). The regulations will put a damper on bilateral trade and make investors think twice before further investing in a supposedly integrated Canada-U.S. supply chain.
The reaction to CBSA’s proposed VFD regulations has been virtually unanimous and resoundingly negative. Canadian businesses, consumer groups, customs brokers and trade lawyers are raising strong objections. Some businesses have warned that they are prepared to pull out of Canada altogether if the new regulations take effect. And yet, CBSA appears intent on implementing them this fall, reasoning that more taxes are better, even if the economy shrinks in the process.
CBSA’s proposed VFD regulations will unnecessarily complicate the flow of goods into Canada at a time when we need well-functioning supply chains and co-ordinated bilateral regulations. Canada must rethink this approach. We urge the government to engage in more comprehensive consultations with businesses of varying sizes and sectors to ensure that any regulatory changes support Canada’s economic growth and competitiveness. We also encourage the government to conduct a detailed cost-benefit analysis to get a full picture of the economic impacts on Canadian consumers, businesses, taxpayers and jobs.
Canada is a trading nation. Our economic success is based on our continued ability to participate in efficient and secure global supply chains while respecting our trade agreements.
At present, storm clouds loom large. Republicans and Democrats in the United States share increasingly protectionist views on trade, achieving rare bipartisan consensus on “America first” and “anybody but China” trade policies. A possible Donald Trump victory in November’s presidential election and a destabilizing USMCA 2026 review process threaten the foundations of North American trade relations. Canada can’t afford to let things slide at home.