Tax Insights: US executive order on strengthening customs enforcement — Implications for Canadian businesses

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Issue 2026-25

In brief

What happened?

US President Donald Trump signed Executive Order (EO) 14411¹ “Strengthening Customs Enforcement” on June 3, 2026. The EO directs the Department of Homeland Security (DHS) and US Customs and Border Protection (CBP) to undertake a comprehensive reform of how goods enter the United States. The EO also directs the DHS and/or CBP to:

• strengthen several requirements for all importers of record (IORs)
• impose significant new restrictions on “foreign IORs” (a definition that will apply to many Canadian entities)
• enhance import disclosure and certification requirements
• increase enforcement and penalties
• recommend legislation to further strengthen customs enforcement 

Why is it relevant?

Canadian entities that do not meet the new “US IOR” definition will be classified as a “foreign IOR” and subject to more restrictions, such as not being able to file informal entries and having limits on continuous bond usage.

For Canadian multinational enterprises with intercompany cross‑border supply chains, the EO's enhanced disclosure requirements — including beneficial ownership, business affiliations, foreign tax identifiers and detailed supply chain information — will provide CBP with significantly greater visibility into intercompany structures. This increases the importance of ensuring that intercompany pricing and documentation is consistent between customs valuation and transfer pricing.

Actions to consider

Canadian businesses that import into the United States should review whether they qualify as a US or foreign IOR, and, if they are a foreign IOR, consider strengthening their US presence or using a Customs Trade Partnership Against Terrorism‑validated customs broker. They should also make sure that their customs valuation is aligned with their transfer pricing documentation, prepare for expanded disclosure and documentation requirements, and plan for changes in bonding and entry procedures. Businesses should estimate the added costs and penalties and reassess their supply chains to see whether US‑based operations or Canada-United States-Mexico Agreement (CUSMA) optimization could improve both customs and tax outcomes.

In detail

Key provisions of the EO 

Strengthening several requirements for all IORs 

All IORs are required to maintain a minimum level of tangible domestic assets, bonding, or both, to ensure compliance with US customs and trade laws; EO 14411 directs the CBP to increase the minimum required bond coverage for an IOR. IORs will also be required to provide CBP with expanded identification and operational data, including anticipated import volumes, year organized, ownership and beneficial ownership, business affiliation and domestic asset disclosures. 

Within 180 days of the EO (i.e. by November 30, 2026), CBP must establish and enforce a “good standing” requirement for each IOR based on their and their affiliates’ history of compliance with US customs and trade laws and regulations. An IOR that is not in “good standing” will not be allowed to import into the United States or conduct activities directly related to the importation of goods, including designating a customs broker to act as IOR on their behalf. CBP will enhance vetting procedures, including recurring vetting, and create risk‑based tiers for IORs within the IOR registry.  

Imposing significant new restrictions on foreign IORs 

The EO distinguishes between a “US IOR” and a “foreign IOR.” A “foreign IOR” is any entity that does not meet the definition of “US IOR.” 

The term “US IOR” means, in the case of an entity, an IOR that is organized under US laws, is located in the United States, and has at all times controlling beneficial owner(s) who are US citizens or lawful permanent residents; or owns a significant amount of real property in the United States.  

The DHS and CBP will provide guidance on the meaning of “located in the United States.” The guidance will “prioritize preventing entities from using shell companies, sham transactions, or artificial corporate or organizational structuring in an attempt to qualify as a US IOR.” At a minimum, for an entity to qualify as “located in the United States,” it must have in the United States:  

• its principal place of business 
• a physical presence where significant business activity is conducted 
• sufficient tangible assets, taking into account the size and scale of the company’s overall operations and whether the entity is an instrument of a foreign manufacturer without a substantial US presence  

A foreign IOR will be prohibited from filing informal entries. When filing formal entries, a foreign IOR:  

• cannot rely on a continuous bond to meet the bond requirements for entry, except as permitted by CBP when the foreign IOR has demonstrated that the revenue would be fully protected and that compliance would be assured, and 
• must be validated in CBP's Customs Trade Partnership Against Terrorism (CTPAT), if eligible, or use a CTPAT‑validated and licensed customs broker to file entries with CBP 

Enhancing import disclosure and certification requirements 

The Secretary of Homeland Security (Secretary) will establish stronger import disclosure and certification requirements, including certifying compliance with critical supply chain requirements such as the Countering America's Adversaries Through Sanctions Act. Importers will be required to disclose certain foreign tax and global business identifiers and provide detailed information about the imported goods’ supply chain and production methods. Within 90 days of the EO (i.e. by September 1, 2026), the Secretary will also mandate foreign exporters to submit any documentation or information that they were required to submit to their or other countries’ customs administration before exporting to the United States. 

Increasing enforcement and penalties 

The EO directs the Secretary to increase enforcement of customs laws, including: 

• enforcing liquidated damages claims against bonds for non‑compliance, and for importations related to products produced by forced labour or involving misclassification, undervaluation and illegal transshipment 
• imposing maximum penalties for brokers who fail to conduct due diligence, repeatedly represent non‑compliant clients, or fail to cooperate in a timely manner with CBP requests for information 

Within 90 days of the EO, the Secretary will revise all mitigation standards, including: 

• establishing a minimum penalty floor of not less than 50% of the assessed penalty and a minimum liquidated damages floor 
• eliminating mitigation for repeat offenders 

Recommending legislation to strengthen customs enforcement and other measures 

The EO requires the Secretary to provide legislative recommendations to further strengthen customs enforcement within 45 days of the EO. As well, within 90 days of the EO, the Secretary will take steps to: 

• expedite and enhance the seizure and disposal of non‑compliant imports 
• improve transparency, including publishing annual enforcement transparency reports  

Implementation timeline 

Implications for Canadian businesses

Classification as a “foreign IOR”

Many Canadian companies — including Canadian-headquartered manufacturers, retailers and distributors that import directly into the United States — are likely to meet the definition of a “foreign IOR.” Canadian entities that do not have their principal place of business in the United States, that lack a physical presence where significant business activity is conducted, or that lack sufficient tangible US assets will be classified as foreign IORs and face heightened restrictions.

This is particularly relevant for Canadian entities that currently import goods directly into the United States using informal entry procedures or continuous bonds, as both of these mechanisms will be restricted or unavailable to foreign IORs under the new regime. 

Indirect tax implications

The elimination of informal entry for foreign IORs means that all imports into the United States by Canadian entities will require formal customs entries, increasing administrative burden, brokerage fees and landed costs. Heightened bonding requirements — including potential restrictions on continuous bonds — may require Canadian importers to obtain single-entry bonds for each transaction or to seek CBP approval to maintain continuous bond coverage, significantly increasing compliance costs. 

The increased penalty regime (50% minimum floor) and elimination of mitigation for repeat offenders substantially raise the financial risk associated with any customs non-compliance, including errors in tariff classification, customs valuation or origin determination. 

From a Canadian GST/HST perspective, businesses restructuring their supply chains in response to these measures — for example, by establishing US warehousing or fulfilment operations — should evaluate whether such restructuring affects the place of supply for GST/HST purposes, input tax credit entitlements, or the characterization of cross-border transactions as zero-rated exports versus domestic supplies.

Transfer pricing considerations

The requirement to disclose foreign tax and global business identifiers, combined with enhanced supply chain transparency obligations, will provide CBP with significantly greater visibility into the structure of intercompany arrangements between Canadian parent companies and their US affiliates. The requirement to provide detailed information about the imported goods’ supply chain and production methods may also expose previously undisclosed intercompany manufacturing or toll arrangements to customs review. 

Canadian multinationals should ensure that the intercompany prices reported for customs valuation purposes are consistent with the arm's‑length prices reported for income tax purposes, and vice versa. Inconsistencies could trigger both CBP penalties and Canada Revenue Agency scrutiny. The new 50% minimum penalty floor significantly increases the financial exposure arising from any such inconsistency. 

The anti-avoidance language — specifically the requirement that further guidance on “located in the United States” shall prioritize “preventing entities from using shell companies, sham transactions, or artificial corporate or organizational structuring in an attempt to qualify as a U.S. IOR” — should be considered alongside the arm's-length principle and the substance requirements that apply to intercompany arrangements under both Canadian and US transfer pricing rules. Structures that lack genuine economic substance, or that exist primarily to obtain favourable customs treatment, may be challenged under both customs law and transfer pricing rules.

International tax planning and supply chain structuring

Canadian businesses that use intermediary holding or trading entities in their US supply chains should review whether these entities satisfy the new “located in the United States” test. This analysis overlaps with, but is not identical to, the economic substance analyses undertaken for transfer pricing, treaty eligibility and Pillar Two (i.e. global minimum tax) purposes.

The enhanced vetting and risk-based tiering of IORs may also affect Canadian businesses' ability to restructure their US import operations. Entities with poor compliance histories, or affiliates with enforcement actions, may find themselves in higher-risk tiers subject to increased audits and scrutiny. Canadian multinationals should therefore assess their overall global compliance posture, including the compliance history of all affiliates, before implementing supply chain restructurings.

The interaction between this EO and the broader US tariff environment — including section 232 tariffs on steel, aluminum and copper,² section 122 global tariffs³ and the permanent de minimis repeal⁴ — means that the cost and complexity of importing into the United States continue to rise. 

Next steps for Canadian businesses 

Canadian businesses that import into the United States should:

• assess their IOR classification – Determine whether the business (or US affiliate acting as IOR) meets the definition of a “US IOR” or a “foreign IOR,” paying particular attention to the “located in the United States” requirements. For businesses classified as a foreign IOR, evaluate whether operational changes (such as establishing or strengthening US presence) or use of a CTPAT‑validated customs broker are warranted.
• align their customs valuations with transfer pricing – Ensure that intercompany prices reported for customs valuation purposes are consistent with arm's‑length prices reported for income tax purposes, and that transfer pricing documentation adequately supports the customs value declared on entry.  
• prepare for enhanced disclosure obligations – Identify the documentation and data that will be required under the new certification and disclosure regime, including foreign tax and global business identifiers, supply chain information, production methods, and any documentation previously submitted to Canadian or other foreign customs authorities. 
• evaluate bonding and entry procedures – For Canadian entities currently using continuous bonds or informal entry procedures, develop a transition plan, which may require single-entry bonds, CTPAT validation, or engagement of a CTPAT‑validated customs broker. 
• model the financial impact – Quantify the potential financial impact of increased bonding costs, brokerage fees, penalties and compliance expenditures, including the heightened penalty regime (i.e. 50% floor). 
• revisit supply chain structuring – Evaluate whether current supply chain configurations remain optimal in light of the cumulative effect of this EO, the repeal of the de minimis shipment exemption, CUSMA preferences and the broader US tariff environment (section 232, section 122 and related measures). Consider whether US-based warehousing, manufacturing or CUSMA‑origin optimization strategies offer benefits from both a customs and an income tax perspective.

The takeaway

EO 14411 represents a fundamental shift in how the US will regulate foreign entities importing goods into the country. For Canadian businesses, the most immediate concern is whether they — or their US affiliates — will be classified as foreign IORs and, if so, how to manage the transition to the new compliance framework. 

The EO's enhanced transparency and disclosure requirements also create new risks for customs valuation and transfer pricing. Canadian businesses should engage their customs, indirect tax, transfer pricing and international tax advisers in a coordinated assessment of these measures — siloed approaches will miss the interconnections between these disciplines.

Most significant reforms will not take effect immediately — DHS and CBP will engage with stakeholders, so affected parties will have some time to adjust their operations. However, the 90-day deadlines for penalty revisions and disclosure requirements are aggressive. Certain requirements that apply to foreign IORs, including prohibiting informal entry procedures and restricting the use of continuous bonds, are directed to be implemented "promptly."  

We can help your business navigate this evolving trade environment (see our Tariffs and Trade Policy Resource Centre for more information).