Canada Border Services Agency's Updated Trade Compliance Verification Priorities Target Goods Subject To Retaliatory Tariffs

In July 2025, the Canada Border Services Agency ("CBSA") released its latest list of trade compliance verification priorities (the "July 2025 update").¹ As the first adjustment to CBSA verification priorities since January 2025, this update provides the most recent indication of which commercial goods being imported into Canada may be verified by the CBSA.²

Focus on Cross-Border Imports

Notably, the July 2025 update introduces three new compliance priorities concerning imports from the United States (US). These are:

• Goods subject to the United States Surtax Order (2025-01). This order was introduced in March 2025 in response to US tariffs on Canadian goods imported into the US from Canada. It applies a 25% surtax on the value for duty (the "VFD") of certain goods imported into Canada that originate in the US.³
• Goods subject to the United States Surtax Order (Steel and Aluminum 2025). This order was also introduced in March 2025, in response to US tariffs on Canadian steel and aluminum products imported into the US from Canada. It applies a 25% surtax to steel, aluminum, and certain other goods originating in the US and imported into Canada.⁴
• Goods subject to the United States Surtax Order (Motor Vehicles 2025). This order was implemented in response to US tariffs on Canadian-made vehicles and auto parts imported into the US from Canada. It applies a 25% surtax to motor vehicles originating in the US and imported into Canada.⁵

See our previous publications for more details on these measures.⁶

These new compliance priorities reflect continued Canada-US trade tensions, which have received significant political and public attention in both countries. As long as the US surtax orders remain in effect, companies importing US goods should expect increased scrutiny from the CBSA as it seeks to enforce these orders.

The CBSA's mandate would extend to verifying eligibility for surtax remission claims made by importers under the United States Surtax Remission Order (2025). The CBSA has published its interpretive guidance on how it intends to administer the order in a Customs Notice.⁷ Given a lack of clarity surrounding the CBSA's evolving interpretations of the order, the CBSA's practical administration and enforcement could provide further clarity as to the scope of the remission, including through appeals and recourse sought by aggrieved importers.

Other Compliance Priorities

Several existing compliance priorities remain in place. These are:

• Tariff rate quota and classification of supply managed goods, particularly frozen desserts containing 5% of dairy products;
• GST and excise duties and taxes, notably the use of GST exemption codes and whether vaping products are subject to excise duties and taxes;
• Import origin verifications under the Canada-European Union Comprehensive Economic and Trade Agreement and the Canada-United Kingdom Trade Continuity Agreement;
• The Duties Relief Program, including verifications of licensees importing supply managed goods;
• Electric vehicles, steel, and aluminum subject to the China Surtax Order (2024).⁸

Due to the "revenue neutrality" arising from registrant commercial importers' eligibility for input tax credit ("ITC") claims to recover 5% GST payable on import, GST status declarations can be overlooked and neglected.

Nonetheless, due to the interaction between the GST legislation and the Customs Act, failure to use an appropriate GST "exemption" code⁹ could lead to Administrative Monetary Penalties ("AMPs"). If available, there could also be a cash flow benefit derived from obtaining upfront GST relief on import.

In certain circumstances where importers are ineligible for ITC claims, the GST "exemption" codes may result in direct tax savings. Where 13%/14%/15% HST could apply on consumer imports, an available "exemption" code could relieve the HST. Note that eligibility criteria may be quite technical and may require careful research and analysis to determine their applicability, including considering relevant jurisprudence.

Updated Verification Priorities

The July 2025 update identifies the following goods as tariff classification verification priorities. The CBSA will verify whether these goods are being correctly classified under their appropriate tariff classifications.

The July 2025 update further identifies the following goods as an origin verification priority. This priority ensures that the origin, tariff treatment and duty rates of these imported goods are properly declared.

The July 2025 update removes the following compliance priorities previously identified by the CBSA: tariff classification of disposable and protective gloves, and valuation of apparel items. Also, imports affected by Canada's decision to withdraw Most-Favoured-Nation tariff treatment from goods originating in Russia or Belarus are no longer identified as a compliance priority.

In identifying an imported good for valuation verification, the CBSA determines whether the VFD of the imported good is being accurately declared. This determination could affect not only ad valorem customs duties but also GST and other taxes imposed at the border on import.

Footnotes

1. Government of Canada, "Trade compliance verification" (Last Modified 4 July 2025).

2. Government of Canada, "Trade compliance verification" (Archived, Last Modified 7 January 2025).

3. Government of Canada, "Customs Notice 25-10: United States Surtax Order (2025-1)" (Last Modified 2 May 2025).

4. Government of Canada, "Customs Notice 25-11: United States Surtax order (Steel and Aluminum 2025)" (Last Modified 2 May 2025).

5. Government of Canada, "Customs Notice 25-15: United States Surtax Order (Motor Vehicles 2025)" (Last Modified 2 May 2025).

6. We have been regularly reporting on critical tariff-related updates. See our previous publications: All Things Tariffs: A Comprehensive Overview of Where We Stand Today; The Pause on the Tariff War: How Businesses Can Use the Reprieve Wisely; Preparing for Potential US Tariffs: Key Dates and Strategic Considerations.

7. Government of Canada, Customs Notice 25-17 : United States Surtax Remission Order (Motor Vehicles 2025) (Last Updated 20 May 2025);

8. Government of Canada, "Customs Notice 24-32: China Surtax Order (2024) – Electric Vehicles" (Last Updated 11 December 2024); Government of Canada, "Customs Notice 24-26: China Surtax Order (2024) – Steel and Aluminum" (Last Updated 11 December 2024).

9. While referred to as GST "exemption" codes, they generally apply to imported products, the supply of which would be zero-rated (taxed at 0%), rather than exempt (non-taxable) supplies. There are also special circumstances in which GST (or HST as applicable) could be relieved, such as goods returned to Canada on which GST/HST previously paid. The specific relieving provisions can be quite technical and have multiple conditions or criteria to satisfy.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025