Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

California’s Proposed “Made in California” Labels Law is State Protectionism

By Cyndee Todgham Cherniak on Posted in Buy America, Cross-border trade, Legal Developments, Politics, State Governments

Canada-US Blog has received the following information from Birgit Matthiesen, Special Advisor to the President and CEO of the Canadian Manufacturers & Exporters:

The Los Angeles Times reports that “there are in-state manufacturers that want to see the adoption of an official label that declares Made in California. State Sen. Ellen M. Corbett (D-San Leandro) has introduced legislation to require Go-Biz, the governor’s business development office, to come up with a plan – including the new label – to promote California-manufactured products.” Sen. Corbett said the legislation “would enhance California’s reputation for making environmentally safe and energy efficient products.”

The legislation is SB 12 and the link to the nine page bill is below.

http://leginfo.ca.gov/pub/13-14/bill/sen/sb_0001-0050/sb_12_bill_20121203_introduced.pdf

The definition of “manufacturer” from page 8 is particularly of concern.

(2) For purposes of this section, “manufacture” means the line process of taking raw materials or components and adding value line to those materials and components in order to create a final, line recognizable product. “Manufacture” does not include the process line of completing a final assembly from subassemblies made line elsewhere, or the act of packaging a product.

Canadian manufacturers and exporters should be concerned about the proliferation of State Buy America initiatives. This is just one example of a developing problem for cross-border trade.

Thank you to Birgit for letting us know about this important development.

What Should You Do When You Hear A Rumour About An Antidumping Case

By Cyndee Todgham Cherniak on Posted in Cross-border deals, Cross-border trade, Customs Law, Trade Remedies

Sometimes the rumour mill churns news about a potential anti-dumping and/or countervailing duty case before it is officially initiated by the Canada Border Services Agency (CBSA). Importers and exporters ask how they can mitigate risk.

Importers and exporters have an opportunity to get organized and prepare their documentation in advance – the extra time may be helpful because the CBSA does not give much time to prepare and submit an RFI response (usually it is around 30 days). Old RFI questionnaires are great precedents for gathering some of the basic and specific information.

More importantly, importers need to know how to protect themselves from a potentially huge bill on goods that may land in Canada after the preliminary determination of dumping (usually 90 days after the case is initiated, but can be extended at the discretion of the CBSA).  This means that importers have only 90 days from a purchase order date (prior to initiation) to land the goods.  Sometimes the anti-dumping and/or countervailing duty can exceed 200% of the value of the goods.

We also recommend to importer clients that they include protection clauses in the purchase orders and order when the rumour mill is active.  Protection clauses allow for the order to be cancelled if the goods cannot land before the preliminary determination of dumping and set out the terms for the refund of the deposit. We would be pleased to discuss this with you further.

The Canada Border Services Agency Expects Canadians To Report Imports/Exports of Cheques Over $10,000

By Cyndee Todgham Cherniak on Posted in Border Security, Cross-border deals, Cross-border trade, Customs Law, FCPA/Anti-Corruption

The Canada Border Services Agency (CBSA) expects Canadians returning to Canada to report cash, travelers cheques, personal cheques, money orders, bank drafts, promissory notes, stocks, bonds, debentures, treasury bills,  and other monetary instruments that combined exceed $10,000.

Example 1: If a lawyer receives payment from a client in the United States (the bill was over $10,000) and returns to Canada with a cheque, the lawyer should report the cheque to the CBSA and will be sent to the secondary inspection area.  In the secondary inspection area, the traveler will be required to fill out a form.

Example 2: If Grandma gives you a personal cheque for $10,000, you should report the cheque to the CBSA and will be sent to the secondary inspection area.  In the secondary inspection area, the traveler will be required to fill out a form.

Example #3: If you won at the poker table in Las Vegas and have over $10,000 in cash or a money order or draft, you should report the cheque to the CBSA and will be sent to the secondary inspection area.  In the secondary inspection area, the traveler will be required to fill out a form.

If you do not report currency or monetary instruments that exceed $10,000, your cash or monetary instrument may be seized (any forefieted by you) and you may be fined $250 or more.

If you look closely at the E311 Form “Declaration Card” there is a box to check if you have currency or monetary instruments that exceed $10,000 (when all such items in your possession are added together). However, individuals who cross the border by car do not receive this form to complete.  All Canadian residents should be aware of D-Memorandum D-19-19-1 “Cross-Border Currency and Monetary Instruments Reporting”. It is scarier than most horror movie scripts.

Similarly, if you have over $10,000 in currency or monetary instruments when leaving Canada, you should report it to the CBSA before leaving Canada.

Canada-Panama Free Trade Agreement Comes Into Effect

By Cyndee Todgham Cherniak on Posted in Cross-border trade, Trade Agreeements

On April 1, 2013, the Canada-Panama Free Trade Agreement came into effect.  On March 18, 2013, the Canada Border Services Agency (CBSA) issued Customs Notice CN-2013-005 “Implementation of the Canada-Panama Free Trade Agreement (CPAFTA)”.

A copy of the CPAFTA may be found on the Department of International Trade web-site. The CPATFTA was signed on August 11, 2009.   Canada has also signed a Foreign Investment Promotion and Protection Agreement with Panama.

Canada’s Tariff Treatments (as at April 1, 2013)

By Cyndee Todgham Cherniak on Posted in Cross-border trade, Customs Law

Canada does not have a single customs duty or tariff rate for all imports. Over the years, Canada has entered into a number of preferential trading arrangements (e.g., NAFTA) and international agreements (e.g., WTO) that set preferential tariff rates.

The following table sets out Canada’s tariff rate categories under the Customs Tariff (Canada) and the Canada Border Services Agency reporting codes as at April 1, 2013:

Tariff Treatment Category Abbreviation CBSA Reporting Code
Most-Favoured-Nation (MFN) MFN 2
General Tariff GT 3
Australia Tariff AUT 4
New Zealand Tariff NZT 5
Commonwealth Caribbean Countries Tariff  CCCT 7
Least Developed Countries Tariff LDCT 8
General Preferential Tariff GPT 9
United States Tariff UST 10
Mexico Tariff MT 11
Mexico-United States Tariff MUST 12
Canada-Israel Agreement Tariff CIAT 13
Chile Tariff CT 14
Costa Rica Tariff CRT 21
Iceland Tariff IT 22
Norway Tariff NT 23
Switzerland-Lichtenstein Tariff SLT 24
Peru Tariff PT 25
Colombia Tariff COLT 26
Jordan Tariff JT 27
Panama Tariff PAT 28

If the CBSA Seizes Your Goods and Mistakenly Destroys Your Goods, You May Seek Compensation

By Cyndee Todgham Cherniak on Posted in Cross-border litigation, Cross-border trade, Customs Law

It does not happen often – but, from time to time, the Canada Border Services Agency (CBSA) destroys detained goods by mistake. Goods that are being importer or that are being exported may be detained and destroyed in error.

One of our clients experienced a shock when the CBSA wrote to them to say that goods they were to release could not be released because they had been destroyed.  in this case, the goods were detained upon export and questions were asked by the CBSA about whether an export permit was required.  After it was determined that an export permit was not required, the CBSA ordered the goods to be released to the shipper.  When the CBSA went to retrieve the goods from the storage area, they shouted “OOOOPs”.  After reviewing the paperwork, it was discovered that someone had mistakenly sent the goods for destruction.

In these circumstances, an aggrieved party must act quickly. Subsections 106(1) and (2) of the Customs Act (Canada) contains a short time limit for suing a CBSA officer (or the CBSA) and provides:

“(1) No action or judicial proceeding shall be commenced against an officer for anything done in the performance of his duties under this or any other Act of Parliament or a person called on to assist an officer in the performance of such duties more than three months after the time when the cause of action or the subject matter of the proceeding arose.

(2) No action or judicial proceeding shall be commenced against the Crown, an officer or any person in possession of goods under the authority” of an officer for the recovery of anything seized, detained or held in custody or safe-keeping under this Act more than three months after the later of:

(a) the time when the cause of action or subject matter of the proceeding arose; or

(b)  the final determination or outcome of any action or proceeding taken under this Act in respect of the thing seized, detained or held in custody or safekeeping.

The above provision starts a formal process in the courts.  The CBSA also may want to resolve the proceeding out of court.  There are unwritten procedures that permit an aggrieved party to seek compensation from the CBSA.  The informal procedure is commenced with the writing of a letter asking for compensation on the basis that goods have been destroyed by the CBSA in error.  All documentation concerning the import or export would have to be provided concerning the goods that were destroyed.  All the circumstances concerning the detention need to be provided as part of the justification for the compensation claim.  Most importantly, the amount of compensation being sought should be included. If the amounts are significant, the approval process for the compensation may be longer.  If amounts of compensation are sought that exceed the replacement value of the goods, the CBSA may dispute the additional claims.  However, there may be some justifiable damages claims (e.g. interest on financing of the destroyed goods, penalties charged by third parties for failure to deliver the goods in a timely manner, etc.).

Sometimes, it may be necessary to commence both the formal process and the informal process.  The formal court proceedings may be held in abeyance after filing.  It is important to satisfy limitation periods because failure to file an action within the 3 month limitation period may limit leverage and options should the negotaitions for compensation break down.

End Use Certificates For Imports Into Canada: Have Them Ready To Present

By Cyndee Todgham Cherniak on Posted in Cross-border deals, Cross-border trade, Customs Law

Many importers/exporters are familiar with End Use Certificate requirements for export transactions, which are provided to give information for export controls / economic sanctions purposes.  It is important to realize that a different form of End Use Certificate may be required for import purposes when an importer has classified goods pursuant to special duty relieving “end use” tariff items in Chapter 99 of the Customs Tariff (Canada).  Many Chapter 99 tariff items have a lower rate of duty applicable.  Some Chapter 99 tariff items contain wording that restricts or constrains the imported goods to certain uses. For example, the tariff item contains the words “for the use in”. “for use in the manufacture of”, “for the use by”, “for use on”, “for”, “to be employed”., or “”which enter into the cost of manufacture of”". Simply put, if you are importing goods for a specified end use, you are able to benefit from reduced duty rate.

However, in order to benefit from the lower tariff rate, evidence of the application of the end use pre-condition is required.  An End-Use Certificate from the party who will use the goods satisfied the evidentiary burden to a certain extent.  An End Use Certificate is an attestation affirming the use of the imported goods in accordance with the with the provisions of the end use tariff item (see D-Memo D-11-8-5 “End Use Programs”). An End Use Certificate must be signed by the end-user of the goods and include the end user’s name, address, occupation, actual end use of the goods (a brief description of the manner in which the goods will be used), the applicable tariff item number and a description of the goods (see D-Memo D-11-8-5 and D-Memo 17-1-21 “Maintenance of Records In Canada by Importers“).

The importer must maintain records of the End-Use Certificate. The CBSA takes the position that the End-Use Certificate must be available at the time of importation.  End Use Certificates signed after the fact may not be accepted by the CBSA despite the fact the information is accurate and correct and the information in the certificate may be verified.

Sailing Too Close To The Legal Winds: Carrying Large Amounts of Cash Across the Border

By Cyndee Todgham Cherniak on Posted in Border Security, Cross-border trade, Customs Law, FCPA/Anti-Corruption

In the recent decision of Docherty v. Minister of Public Safety and Emergency Preparedness, (2012 FC 723) Federal Court of Appeal judge Phelan wrote as the first line of the decision:

“This is a case of a traveller sailing too close to the legal winds. But for greed, this Applicant would not be in Court.”
Mr. Robert Malcom Docherty failed to declare cash in an amount exceeding $10,000 and it was seized pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada). Mr. Dockerty was traveling from Toronto Pearson International Airport to Costa Rica when he was stopped by the CBSA (a currency sniffer dog smelled money).  He had in his possession $USD 9880.00 and $CAD 335.00.  With the conversion of $USD into $CAD, he exceeded the $10,000 threshold.
The Bank of Canada rate made all the difference.  On that day, the conversion rate put him over the monetary threshold and the money was seized.  Mr. Docherty knew about the monetary threshold limit for reporting and had made an attempt to stay below the threshold. Unfortunately, he miscalculated.
This should be a lesson for travelers.  It was a costly lesson for Mr. Docherty.  All the cash was seized as forfeit – any he missed his flight.

If You Have Commercial Goods, Do Not Use the NEXUS Line/Lane at Customs

By Cyndee Todgham Cherniak on Posted in Cross-border deals, Cross-border trade, Customs Law, NEXUS

Lately, a number of clients have called with incident reports involving either the Canada Border Services Agency (CBSA) or U.S. Customs and Border Protection (USCBP) confiscating NEXUS passes from business travelers because the traveler had commercial goods in the NEXUS line/lane. In all cases, the business traveler properly declared the value of the goods and/or their possession of the goods.  The infraction was being in the wrong line/lane with their commercial goods.

The CBSA and USCBP remind the business traveler of a short statement in the brochures (NEXUS Membership Guide) about NEXUS privileges that travelers cannot use the NEXUS lane when they have commercial goods. The instructions state:

“If you have any commercial goods in your possession or baggage or on board the vehicle/recreational boat upon arrival in Canada or the United States, you may not use NEXUS in the air, land or marine modes of transportation. Commercial goods are defined as goods brought into Canada or the United States for sale or for any commercial, industrial, occupational, institutional or other similar use and include samples, tools and warranty repair parts.”

Personal computers and similar items carried by NEXUS members for their own personal use while on business trips are not considered commercial goods.”

One business traveler had a sample of a ware in his briefcase and informed the border officer.  One business traveler in the jewelry business returned to Canada with a piece of jewelry and inputted information in the automated kiosk the value of that item.  One business traveler purchased business cards overseas (with certain information translated). One business traveler was returning to Canada with banners used in a trade show in the United States.  One business traveler was going to a convention in the United States with a box of brochures.  All these business travelers had their NEXUS cards confiscated.

I have heard from individuals whose NEXUS cards were confiscated at the border crossing.  Some received a letter from the NEXUS program and some do not. Other individuals do not have their NEXUS cards taken at the border and receive a warning letter in the mail.  The use of discretion is sometimes at zero tolerance and is sometimes a little more flexible.

Business travelers must be careful because their NEXUS card is a valuable time-saving asset.  When in doubt, use the long line up.  Using it once is better than having to use the long line up every trip for 7 years.  Another option is to courier commercial goods because the customs paperwork will be completed by the courier company.

 

Easter Week-End Is A Busy Time for The Canada Border Services Agency And The Easter Bunny

By Cyndee Todgham Cherniak on Posted in Customs Law

Every year at Easter, Canadians travel to the United States and abroad to visit family and friends for the holidays. Every year, the Canada Border Services Agency (CBSA) steps up enforcement at the border because there are more travelers. Every year, some travelers fail to declare some goods purchased or acquired outside Canada. Every year, some people make real mistakes, others make honest mistakes, and others are innocently accused of violations under the Customs Act.

Be aware that the CBSA is looking for under-declarations.  The best way to prevent a problem is to keep organized records.  When you buy goods outside Canada, put the receipt on an organized file folder or envelop.  Do not throw out the receipts or keep then in the bags (as you may forget about a receipt or two).  Take 10 minutes before returning to Canada to prepare a written list of the goods acquired or received outside Canada and their values.  If you purchased the good, record the price on the sales receipt including taxes and shipping and delivery (if applicable).  If the goods were a gift, ask the giver to provide you with the receipt or the value.  If the gift was not recently purchased, try to locate a fair market value. If the goods are something you bought years ago (e.g., property of a family member), then get an appraisal for expensive items and/or look for a fair market value.

When preparing the list and adding the values, remember to convert the values into Canadian dollars.