Trade war and ‘tariff cheating:’ What Canadian exporters need to know

Acera Insurance’s Aliya Daya spoke with Canadian Underwriter magazine about the U.S. Department of Justice’s directive to prosecute alleged ‘tariff cheaters’ — and how Canadian exporters can best protect themselves amid the ongoing trade war.

Canadian Underwriter reports that the U.S. is on high alert for “trade and customs fraud, including tariff evasion,” and that Canadian and European businesses will likely be key targets when it comes to enforcement.

This means that, in addition to managing price volatility, Canadian exporters must also strategically protect themselves from accusations of mismanagement or non-compliance.

“Let’s say a company is accused of misclassifying imported goods to reduce tariff exposure. If regulators investigate and allege that the company leadership failed to implement proper compliance controls, the executive could personally face allegations of negligence or mismanagement.”

Aliya Daya, Senior Client Executive, Commercial Insurance

In such cases, Daya notes, that directors and officers (D&O) liability insurance may help cover defence costs (but not any resulting fines or penalties).

What insurance covers tariffs?

There is no insurance that specifically covers tariffs, but businesses don’t have to go without protection as the trade war continues.

“There are four main coverages that could, in multiple ways, assist with some form of protection.”

Aliya Daya, Senior Client Executive, Commercial Insurance

The four coverages that can offer protection as the trade war wages on are:

• Political risk insurance
• Supply chain and contingent business interruption insurance
• Export insurance
• Trade credit insurance

Daya shared with Canadian Underwriter how each of these policies provide coverage for very specific losses that may result from tariffs. For example, in the case of contingent business interruption insurance, Daya explained: “[It doesn’t] respond to the tariff itself, but the business interruption caused by it.”