Do you buy products or services online? If yes, you are participating in e-commerce transactions. If these products or services happen to come from other countries, then this is a cross-border transaction. Presented this way, international transactions may seem simple. However, there’s actually more happening beneath the surface.
What is cross-border e-commerce?
Cross-border e-commerce is not viewed as a new trade. Rather, it’s a continuation of commerce through digital means. This is why Canada laws define e-commerce as the delivery of information, products, services, or payments through automated media. This includes retail transactions done via computers, ATMs, cards, and phones.
Even television shopping falls under the definition of e-commerce. Cross-border e-commerce, therefore, is any digital trade activity done across Canadian borders. Considering the consistent presence of the internet, cross-border e-commerce is now more common even among individual business owners.
What is the e-commerce law in Canada?
The e-commerce law in Canada is a combination of federal, provincial, and even international principles that guide digital trade. The specific laws that apply actually depend on the character of the transaction itself.
Generally, and for cross-border e-commerce purposes, these laws can apply to both buyers and sellers in Canada. Here are some of the transactions where cross-border e-commerce exists:
- a consumer buying retail from a foreign seller
- a business entity buying products from a foreign seller for resale
- a consumer selling retail for a foreign buyer
- a business entity selling products to a foreign buyer for resale
Note that e-commerce can include services. A good example would be subscriptions from streaming services.
What Canadian laws protect you when you are shopping on the internet?
There are multiple laws affecting cross-border e-commerce in the country. Since digital trade is a continuation of trade, some trade laws have a special section for automated media. Here’s an overview of how these laws impact your cross-border e-commerce transactions:
Data privacy laws for protection of personal data
The collection, use, and disclosure of personal information is governed by the Personal Information Protection and Electronic Documents Act (PIPEDA). If you’re providing personal information online, PIPEDA is the law that prevents businesses from disclosing your data without consent.
Privacy regulators can also investigate acts that tend to manipulate consumers in giving away private information. Strategies, like deceptive design patterns of e-commerce platform like websites and apps, could be the subject of further legislation in Canada’s cross-border e-commerce space.
Competition Act
The Competition Act is responsible for regulating marketing practices. The goal is to prevent deceptive information from influencing buying decisions in a competitive market. The act covers deceptive practices like "Made in Canada" claims, fake sales, representations through electronic messages, warranties, and others.
Unauthorized credit card transactions
The Financial Consumer Agency of Canada (FCAC) helps prevent fraud in e-commerce transactions. One of these protections includes limiting your liability in case of unauthorized credit card transactions. With cross-border e-commerce, the likelihood of fraud increases.
In fact, a TransUnion study found that around 56 percent of a 1,000-sample size was targeted by fraud in the latter half of 2024. The median loss is estimated to be around $2,013.
For user protection, unauthorized credit card transactions have a limited liability of $50. Mastercard, American Express, and Visa users have the added benefit of zero charges or fees in case of unauthorized transactions.
Of course, prevention of card access is always an important first step. Here’s how you can protect yourself from e-commerce fraud:
Unsure about your next steps? Bookmark this page for updates or look through our Legal FAQs page for additional information.
Anti-spam law for electronic messages
Canada’s anti-spam legislation (CASL) requires electronic business messages to contain precise information. This includes the business name, mailing address, and contact information of the sender. More importantly, it must come with a clear option to “unsubscribe” if the recipient does not want to receive further messages.
In the context of cross-border e-commerce, this usually applies to marketing efforts made by businesses. CASL codifies the need for consent before companies can send newsletters or promotional materials to a target market.
Here’s a good resource for checking if a business is compliant with the anti-spam law.
Provincial and territorial laws
The sale of goods or products sold online is primarily governed by territorial and provincial laws. A good example is the Sale of Goods Act, effective in Ontario. Under this law, all goods sold must be used for the purpose it is ordinarily intended for. If it cannot function according to ordinary use, buyers can request a refund.
However, these provincial and territorial laws mainly govern domestic online sales. You can find out your rights by looking through specific provincial laws. For cross-border e-commerce transactions, existing federal trade agreements are more specific in application.
Product safety of items sold online
Online sellers who import their products or raw materials are subject to consumer packaging and labelling regulations. They also have the responsibility of ensuring the safety of their products through Health Canada regulations before it enters the country.
Accessibility of websites
The Canadian Human Rights Act requires that all online sellers have accessible contacts for persons with disabilities. This rule also applies to digital publishers.
Cybercrime reduction efforts
Cybercrime is a growing concern with credit card fraud now happening across countries. Cross-border e-commerce makes this more likely with consumers who provide credit card details for their online purchases.
Canada approaches this problem through the National Cybercrime Coordination Centre (NC3) of the Royal Canadian Mounted Police (RCMP). Following the National Cyber Security Strategy and the RCMP Cybercrime Strategy, the NC3 is working with national and international partners in addressing growing concerns in cybercrime.
Part of their responsibility is conducting cybercrime investigations together with international partners. Here’s a guide on how to report cybersecurity threats:
Trade agreements covering cross-border e-commerce
The primary hurdle of any cross-border activity is the variance in jurisdiction. Currently, Canada is in several bilateral and multilateral agreements that focus on e-commerce. Some bilateral agreements are present in the following countries:
- United States and Mexico (CUSMA)
- Ukraine
- Ecuador
- Israel
- Korea
- Peru
- Colombia
- Panama
- Honduras
- European Union
Canada also participates in multilateral e-commerce activities for the promotion and protection of its digital trade. These include the Asia-Pacific Economic Cooperation (APEC), African Union (AU) Technical Working Group, and the Organization for Economic Co-operation and Development (OECD).
How to resolve cross-border e-commerce disputes?
A common example of cross-border e-commerce would be buying products online through sites like Wish or Shein. But what happens if you receive a defective item from these online stores?
Unfortunately, there is no specific federal law that addresses online shopping at the consumer level. For cross-border transactions between businesses, the contract or the federal trade agreement usually governs. There are also sufficient guides for US lawyers litigating disputes within Canada.
However, that doesn’t mean there’s no way to solve a cross-border e-commerce problem. Here are some options available for consumers:
Store-specific dispute resolution
Stores typically have their own dispute resolution mechanisms. You can challenge the validity or quality of products ordered online through the company itself. This can include sending a picture of defective products or proving that they were never delivered. In most cases, online platforms honour valid concerns and offer returns and refunds.
Casual refund program
The Canada Border Services Agency (CBSA) offers a Casual Refund Program. This allows Canadians to get a substantial refund for items they purchased from another country. This refund program applies to purchases made by hand or through the internet. However, the refund only applies to duties and taxes paid on the product and not the product itself.
Note, however, that the program doesn’t apply to all purchases. Generally, consumers must meet the following criteria to qualify:
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The request for refund must be made within one year from the time of purchase
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Product must be purchased for non-commercial use only. Hence, importers who intend to resell products online cannot obtain any refunds
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The item subject to the tax refund must be returned to the seller. Proof must be provided that the return was accomplished. There are exceptions such as when the retailer does not require the return of the product
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Consumers must prove that actual taxes were paid on the item. If the tax paid is less than $2, a refund will be denied
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The refund does not include the cost of special services or brokerage fees
Tax implications of cross-border e-commerce
Conducting cross-border e-commerce in Canada exposes the business owner to applicable taxes by the Canadian Revenue Agency (CRA). The extent of the tax depends on whether the entity is a resident or non-resident of Canada. For example, a resident is usually taxed on global income while non-residents are not.
With taxes, however, federal trade agreements have a more specific application. Cross-border e-commerce transactions tend to consolidate different tax approaches through agreements. This way, cross-border transactions become more unified, which actually encourages trade.
An interesting new development in cross-border e-commerce is the implementation of Digital Services Tax. This is a 3 percent tax imposed on income derived from online services such as online advertising. The good news is that it only applies to entities with a global revenue of at least $750 million per year.
Faced with a problem involving cross-border e-commerce transactions? You can check the Lexpert-ranked directory of the best cross-border attorneys today.
Cross-border e-commerce advantages and disadvantages
There’s no question that cross-border e-commerce legislation can protect participants in the Canadian market. But with advantages come drawbacks, which key players need to watch out for.
Here’s an overview of what individuals and businesses need to know about the pros and cons:
Advantages
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Applicable legislation is evolving with more trade agreements likely underway. This helps simplify the process of cross-border e-commerce while benefitting trade.
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International transactions can widen the potential market of a business and therefore increase cross-border e-commerce sales
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A wider market lets businesses leverage seasonal changes in the demand of products or services
Disadvantages
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Compliance can be difficult, especially with the added layer of cross-border transactions. Utilizing resources to comply with existing legislations is a must to prevent possible violations
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Sanction-related litigation risks are also a growing concern for cross-border transactions. Having a legal team that anticipates possible risks is a must in businesses engaged in international trade
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Disputes involving residents of different countries can become more complicated to resolve. Fortunately, trade agreements can assist in case of conflict of laws
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Fraud risks become more prevalent in e-commerce transactions that span countries. Entities are required to engage in best practices to prevent exposure
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Differences in payment systems, currencies, and cultural barriers could also pose problems with cross-border electronic transactions
Cross-border e-commerce a net benefit
Ultimately, cross-border e-commerce poses a net benefit to businesses, consumers, and the government. Canada’s expanding international agreements are certainly helping the market. Combined with federal and provincial laws, cross-border e-commerce should evolve into a powerful industry that protects its key players.
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