The falls itself isn't the border, the Niagara River is the border. The Niagara flows the 38 miles from south to north between Lake Erie and Lake Ontario. The border was set in the Treaty of Paris that ended the Revolutionary War. Specifically Article Two of the treaty set the border through the middle of Lake Ontario until it strikes "the Communication by Water between that Lake and Lake Erie; Thence along the center of said Communcation into Lake Erie". As to when the border between what's now Canada and the colony of New York was established, I don't know. It was before the French and Indian War, when the French built Fort Niagara separated French possessions in New France from the British controlled colonies.