Thursday, June 14, 2007

Customs Law: Canada Edition

The War of 1812 is not well understood in the U.S. Most people have a general notion that the war involved the burning of the White House and Dolley Madison saving the art prior to dropping the letter e and starting her snack food empire. Also, most Americans seem to wrongly believe we won the war. Call it a draw. Also, there was pretty fierce fighting between the U.S. and Canadian forces loyal to the Crown. Now that the saw dust may be settling in the softwood lumber war, it seems a new front in U.S.-Canadian trade friction may be developing.

Apparently some in Congress think the common practice of refunding indirect taxes when goods (or services) are exported discriminates against U.S. sellers and service providers. Congressman Pascell (D-NJ) recently introduced HR 2600 which, if passed, would apply a tax on goods from “any country” that imposes an indirect tax and grants rebates of the tax on export. Although many countries do this, it appears to apply to Canada's Goods & Services Tax. The problem with this system, according to the bill, is that the refund serves as an export subsidy, which, if applied to a direct tax, would be countervailable under WTO rules. I have no earthly idea how big an issue this is, but folks from Maine (for example) are probably irked. The bill includes a caveat that this will all be moot if the U.S. has its way at the WTO negotiations on border tax measures.

While we are on Canada, my friend Cyndee Todgham Cherniak, a prominent Canadian customs lawyer, tips me to this case. Hoang v. Minister of National Revenue. Canada, like the U.S., prohibits the carrying of certain amounts of currency into the country unless it is properly declared. Poor Mr. Hoang was apparently driving around the border when he made a disasterously wrong turn and accidentally crossed into the U.S. He turned around before going through the U.S. check point. On his return to Canada, he told CBSA he was not in possession of more than CA$10,000. Unfortunately, CBSA found (and seized) the CA$70,000 in his car. Oops.

In the Federal Court of Canada, the only real issue was whether Mr. Hoang needed to report the money if he did not have the subjective intent to either export it to start with or import it. The court looked to the common meaning of the word "import" and found that it was a physical act not requiring any specific intent. Thus, the seizure was upheld.

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