Border bungle - SFC licencing complicates import of NHPs

14 December 2020

This article originally appeared in Food in Canada and is republished with the permission of the publisher.

Since the July 15, 2020, implementation date of the licencing requirements for manufactured foods under the federal Safe Food for Canadians Regulations, importers are now required to have a Safe Food for Canadians (SFC) licence to import food products into Canada. Corresponding with this date, the Canadian Food Inspection Agency (CFIA) updated the Automated Import Reference System (AIRS) to specifically link certain Harmonized System Codes (HS Codes) with the requirement for a SFC licence.  

The negative ramifications of the AIRS update were almost immediate, most notably with confusion and delays at border entry points for importers of products that are not classified as foods from a regulatory perspective. In particular, importers of Natural Health Products (NHPs), that have been using the affected HS Codes to legally describe their products for many years, have been affected by these updates. This includes a variety of popular NHPs such as whey and vegan protein powders, greens powders as well as other powdered and liquid products. Following the recent AIRS update, impacted shipments of NHPs are now held at the border while border officials erroneously request SFC licences  in order to clear the shipment. Through the AIRS update, the CFIA is using HS Codes as a regulatory classification tool but has neglected to distinguish between commodities regulated by differing sets of legislation: foods (under the Safe Food for Canadians Regulations) and NHPs (under the Natural Health Products Regulations). While a SFC licence is required for the import of food products, a Health Canada issued site licence is required for the import of NHPs.

From a legal perspective, a tariff classification is based simply on the description of a good presented for importation. Such classification may be used as a regulatory classification tool but it cannot on its own dictate regulatory requirements. Tribunal decisions such as Eastern Division Henry Schein Ash v President of the Canada Border Services Agency (2014) have ruled that regulatory directives are not dispositive of proper tariff classification. In Flora Manufacturing & Distributing Ltd. v The Deputy Minister of National Revenue (2000), the Federal Court of Appeal examined the evidentiary weight of product identification numbers in tariff classification and determined that it would be wrong to use a regulatory classification as conclusive evidence for a tariff classification. This further demonstrates that the exercise of classifying products based on regulatory requirements is separate and distinct from tariff classification. Nonetheless, the presence of a Natural Product Identification Number (NPN), the pre-market licence required to sell an NHP, on a product should provide what the Federal Court of Appeal termed 'practically conclusive' evidence that the product in question is not regulated by food legislation, thereby eliminating the requirement for a SFC licence. Therefore, the request for importers of NHPs to present SFC licences, failing which the shipment will not be released, is not only fundamentally unjust but also illegal, as the import of an NHP, a subset of drugs, must occur via a site licence, not a food licence. 

From a business perspective, it is undeniable that these matters will impact commercial activity going forward. Import delays have already been experienced as border officials have refused to release shipments of NHPs in the absence of a SFC licence. Further, as many importers have fine-tuned their business models and associated operating margins, based upon the tariffs and duties associated with specific HS Codes, it is unreasonable for the CFIA to force these parties to reassign HS Codes overnight, especially considering such codes were never intended as a conclusive classification tool. 

When the Safe Food for Canadians Regulations were first implemented, the CFIA emphasized that they would reduce unnecessary administrative burdens on businesses. Revising AIRS to use HS Codes as a regulatory classification tool has done the opposite and has negatively impacted importers of NHPs. Until the CFIA corrects this matter, importers of NHPs should plan for delays. 

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