Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Canadian House of Commons Approves Canada-EU CETA Implementation Act at Third Reading

Posted in Canada-EU CETA, Trade Agreeements

CETAOn February 14, 2017, the Canadian House of Commons passed Bill C-30 “An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures at Third Reading. There were three days of debates at third reading on February 8, 2017, February 13, 2017 and February 14, 2017.  Bill C-30 moves to the Canadian Senate.  This is good news as Prime Minister Trudeau is leaving for Europe to witness and celebrate the ratification of the Canada-European Union Comprehensive Economic and Trade Agreement by the European Union.

According to Article 30.7(2), the Canada-EU CETA will “enter into force on the first day of the second month following the date the Parties exchange written notifications certifying that they have completed their respective internal requirements and procedures or on such other date as the Parties may agree.”  What this means is that the CETA will enter into force one month after the Senate passes Bill C-30 and the Government of Canada sends the formal written notification of ratification.

All eyes will be on the Senate to move quickly.  Assuming the Senate can work quickly (no pressure), the Canada-EU CETA can enter into force in the Spring of 2017.  Article 30.7(3) allows for provisional implementation of CETA “from the first day of the month following the date on which the Parties have notified each other that their respective internal requirements and procedures necessary for the provisional application of this Agreement have been completed or on such other date as the Parties may agree.”  What this means is that CETA can have provisional application up to a month earlier.  So, if the Senate passes Bill C-30 in March 2017 and the Government of Canada ratifies CETA in March 2017, provisional application can start on April 1, 2017.

Move over BRIC, the Acronym of 2017 Will Be MIC

Posted in Trade Agreeements

Business team on top of the globe. European and African side. Conceptual business illustration. Isolated

It used to be we talked about BRIC (Brazil, Russia, India, China).  We will now be talking about MIC (Mexico, India, China). We used to talk about the developing markets of consumers.  We are now going to be talking about trade.  However, MIC means different things to different countries.  The United States wants to reduce inbound trade from MIC.  Canada, on the other hand, will/should be talking free trade agreements with MIC.  Canada is starting free trade agreement exploratory discussions with China.  Canada and Mexico will discuss a bilateral trade agreement if Mexico-US irritants escalate.  India is quiet now, but Canada has a concluded free trade agreement that has stalled.  It might be time for Canada to re-engage with India before India becomes a country of concern for President Trump.

Over-Compensation Is An Issue In Export Controls/Economic Sanctions Compliance

Posted in Export Controls & Economic Sanctions

Which-way-150x150On February 10, 2017, the CBC posted an article entitled “PayPal freezes Canadian media company’s account over story about Syrian family“.  A community newspaper (Flin Flon Reminder) in Canada saw PayPal freeze its account.  What prompted the freeze was the local newspaper entering an article entitled “Syrian family adapts to new life” in an awards competition.  When the payment for entry into the competition was made, it referenced the article and the message contained the word “Syrian”.

This caused PayPal’s export controls/economic sanctions internal compliance mechanisms to kick in.  The payment was flagged as a suspicious transaction. Under economic sanctions, PayPal cannot facilitate payments for prohibited goods and services.

What happened is that PayPal’s internal compliance procedures over-compensated and caught a transaction that  was not prohibited.  The over-compensation is in response to an OFAC fine in 2015 of $7,658,300.  In 2015, PayPal entered into a Settlement Agreement with the United States Department of the Treasury after violations of U.S. economics sanctions laws.  The Settlement Agreement stated that the penalty was paid because “[f]or several years up to and including 2013, PayPal failed to employ adequate screening technology and procedures to identify the potential involvement of U.S. sanctions targets in transactions that PayPal processed. ”

It is not just U.S. sanctions. Canada imposes economic sanctions against Syria under the the Special Economic Measures Act and the Special Economic Measures (Syria) Regulations. Canada could impose fines against PayPal if PayPal facilitated prohibited transactions.  Global Affairs Canada describes the sanctions, which are quite broad, as follows:

“In addition to the restrictions on dealings with designated persons, the Regulations prohibit:

  • The import of goods, excluding food for human consumption, from Syria;
  • The provision or acquisition of financial services to, from or for the for the benefit of or on the direction or order of Syria or any person in Syria;
  • New investments in Syria;
  • The export to Syria of goods, including technical data, used for monitoring telecommunications;
  • The export of luxury goods to Syria;
  • The exports of goods listed in Schedule 2 of the Regulations, including any technical data related to such goods.

Causing, assisting or promoting prohibited activities is likewise prohibited.”

PayPal is exercising caution and legitimate transactions are going to be frozen from time to time.  This is an unfortunate consequence of compliance programs – in order to ensure that all improper transactions are stopped, some legal transactions are prevented or delayed.

Over-compensation is a consequence of targeted economic sanctions.  For this reason, countries try to target their unilateral economic sanctions and trade restrictions. However, the system is not perfect and fines for non-compliance can be significant.

For more information about export controls and economic sanctions, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.  We have posted many Guidances about economic sanctions on the LexSage website.

What Will Trudeau Talk To Trump About?

Posted in Agriculture, Border Security, Buy America, Canada's Federal Government, Canada-EU CETA, Cross-border trade, Customs Law, Energy, Export Controls & Economic Sanctions, Government Procurement, Harmonization, Immigration law, Imports Restrictions, Labour, NAFTA, Softwood Lumber, State Governments, Trade Agreeements, U.S. Federal Government

Kids Plastic Letters Spelling Abc As Symbol For Education And Learning

On February 13, 2017, Prime Minister Trudeau will travel to the United States to visit with President Trump. The most important topic for discussion is that Canada-United States relationship. The most important goal is to ensure that trading relationshiop remains strong.

This is a fun post, which is based on trade issues between Canada and the United States at the present time.  It is not intended to pick sides or criticize any leader or country. To lighten the mood, I will set out the trade issues in an ABCs format.

A = Autos – Auto jobs must be protected on both sides of the border.  There in an integrated automobile industry involving Canada, the United States and Mexico. There are integrated supply chains that have been developed over many years.

B = Buy North America – Any Buy America provision envisioned by President Trump should treat Canadian manufacturers the same as U.S. manufacturers.  Many manufacturers and distributors have bi-national operations which compliment and supplement each other.

C = Canada – Prime Minister Trudeau will discuss how Canada and the United States cooperate with each other, compliment each other and co-exist.

D = Defence – Defence of the North American perimeter is a military issue, a foreign policy issue and a trade issue.  Prime Minister Harper and President Obama worked hard to establish the North American perimeter so that trade could flow securely and efficiently across the Canada-United States border.  It is critically important for Prime Minister Trudeau and President Trump to find common ground on joint defence – otherwise, cross border trade will be negatively affected. It many be necessary to develop another security program (beyond FAST, NEXUS, C-TPAT, PIP, pre-clearance, IBETs, ghost rider, etc.) – not because safety is an issue, but President Trump may have his own ideas.

E = Exemption – Any border adjustment tax should contain exemptions for Canada.  For example, there should be an energy exemption.  Energy should not be subject to a border adjustment tax as that would increase the costs of U.S.-made goods (manufacturers are significant users of energy) and the costs for U.S. consumers.

F = Farmers – Both countries want to protect the livelihoods of their farmers.  The three large trade issues are (1) supply management (the United States wants it gone), (2) country of origin labeling (the United States wants it reinstated), (3) the Farm Bill (the United States wants to subsidize its farmers).

G = Government Procurement – Both Prime Minister Trudeau and President Trump have announced infrastructure projects.  NAFTA Chapter 10 (Government Procurement) could be advanced to include state/provincial and local procurements.  This would allow Canadian companies to bid on US infrastructure projects and American companies to bid on Canadian infrastructure projects.  It also would allow companies to operate cross-border (many of the big infrastructure firms and steel companies have operations in Canada and the United States).

H = Harmonization of regulations – Canada and the United States have been talking about regulatory cooperation for years.  President Trump has announced that he would like to reduce regulations that impede business.  This can be beneficial for Canadian businesses.  Deregulation and harmonization of regulations can benefit companies in both countries and improve two-way trade flows.

I = Import Taxes – The border adjustment tax and import tax proposals being discussed in the United States would be particularly detrimental to integrated Canada-United States trade and businesses/jobs/the economy.  Import taxes would affect businesses across the country/across the board.  For that reason, the border adjustment tax/import taxes are the single most important trade issue facing Canada.

J = Jobs – This is easy – both Canada and the United States would like new jobs to be created.  The question is whether there can be mutually beneficial job-creating trade policies for both countries. The answer to this question is “YES”.

K = Keystone XL – Prime Minister Trudeau should discuss with President Trump Keystone XL, which was recently given the green light by President Trump.  An application has been submitted by TransCanada Pipeline.

L = Labour Mobility – The Labour Mobility chapter of NAFTA allows a limited number of categories of Canadians and Americans to work in the other country without a visa. The categories can be expanded.  For example, actors are not a category that can enter without a valid visa.

M = Mexico – Mexico is a party to NAFTA.  What Canada needs is for trade to continue even if the U.S.-Mexico trade relationship hits major bumps in the road.  Is is possible for Canada and the United States to remain NAFTA partners if the United States and Mexico separate and head towards a contested divorce.

N = NAFTA – President Trump would like to renegotiate NAFTA.  There are many areas where NAFTA can be improved, such as rules of origin, e-commerce, intellectual property, energy, services, labour mobility, investment dispute settlement, etc.

O = Oil – The United States needs Canadian oil so that it becomes less dependent on Venezuela and Saudi Arabia (more unstable supply sources).  Prime Minister Trudeau has approved two pipeline projects.  President Trump has signaled he will approve two stalled oil pipeline projects.  These projects will result in jobs in both countries.

P = Protectionism – President Trump’s “America First” platform is a protectionist platform.  Protectionist policies have short-term gains and long-term problems.  The key topic for discussion will be how to maximize short-term gains for both countries (and improve re-election opportunities) while minimizing long-term problems for Canada and the United States.

Q = Quotas – As a result of NAFTA, quantitative restrictions (quotas) on most trade between Canada and the United States has ceased.  That being said, the supply management regime involves quotas on dairy, cheese, eggs, and poultry.  In TPP, Canada offered greater access for supply managed products.  The United Stated negotiated for higher quota limits. The United States will want those concessions even though President Trump has announced that the United States will not ratify TPP.  The position of the United States will be that either supply management must end or greater access must be granted to U.S. products.

R = Rules of Origin – The rules of origin in NAFTA can be revisited.  There are many cases where U.S.-made goods do not enter Canada duty-free and the rules can be revisited to improve market access for goods.  There are categories of sensitive goods (such as autos) where the rules may become more restrictive to the benefit of both countries. The rules of origin in the Canada-EU CETA and TPP moved from the 62.5% regional value content in NAFTA.  It is possible to improve the NAFTA rules of origin on autos without upsetting the existing North American supply chains.

S = Softwood Lumber – The next round of the softwood lumber dispute is underway.  Can a permanent solution to the softwood lumber dispute be part of a renegotiated NAFTA?

T = TPP – The United States has officially notified the TPP countries that it will not ratify the Trans-Pacific Partnership Agreement.  TPP is still important to the NAFTA renegotiation.  Some of the hard work on improving NAFTA has already been undertaken in the TPP negotiations and text.

U = Unions – President Trump has met with union leaders.  Prime Minister Trudeau is friendly with unions and wants the union vote.  The issue of the Labour Side Agreement to NAFTA will be important in the NAFTA renegotiation.  Free trade agreements (in both Canada and the United States) after NAFTA include labour protections as a chapter in the main agreement.  Labour and jobs go hand in hand.

V = Vetting Process – The immigration vetting process presents a trade issue. If President Trump is at all concerned about Canada’s vetting process, there can be thickening of the border.  Prime Minister Trudeau has indicated a willingness to increase immigration from the 7 countries at the centre of President Trump’s Executive Order.  President Trump is going to be clear that trade will be affected should Canada’s refugee and immigration plans proceed without extreme vetting. This is going to be a difficult subject and President Trump will be clear – “Security Trumps Trade” (no pun intended – well maybe).

W = Wine – The United States has filed a case recently with the World Trade Organization involving British Columbia legislation giving B.C. wine an unfair advantage in designated grocery stores.  Ontario may be next.

X = X-border trade – The core discussion will be about cross-border trade.

Y = Yes – “Getting to Yes” will not just be a famous book, it will be the slogan for Canada-US trade discussions. Both Prime Minister Trudeau and President Trump will want mutually beneficial solutions to show that they are the leaders who take action to create jobs.  The most progress will be made where both leaders can find common ground quickly.

Z = ZZZZZZ – Does President Trump sleep?

For more information about Canada-U.S. trade, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.  Cyndee has a LL.B. degree from Canada, a J.D. Degree from the United States and a LL.M. Degree in international trade law in Canada.  Cyndee has taught a course about NAFTA at Case Western Reserve University School of Law and a course in Trade Regulation at the University of Windsor, School of Law.  Cyndee is on the Advisory Committee on the Joint J.D./J.D. law degrees of the University of Windsor and University of Detroit Mercy.

Canada’s Big Anti-Bribery Case Ends in Dismissed Charges

Posted in FCPA/Anti-Corruption

Gavel and Scales of JusticeOn February 10, 2017, three former executives of SNC-Lavalin Group Inc. saw Corruption of Foreign Public Officials Act (Canada) charges withdrawn in the Ontario Superior Court. Former SNC vice-president of energy and infrastructure Kevin Wallace, former SNC vice-president of international development Ramesh Shah, and Bangladeshi-Canadian businessman Zulfiquar Ali Bhuiyana were charged with bribing an official in Bangladesh.  This is Canada’s most significant and high profile anti-bribery prosecution against corporate executives.

The charges related to a bid to win a $50 million contract to supervise the Padma Bridge construction.  The Crown’s case had been based on evidence obtained from a Royal Canadian Mounted Police (“RCMP”) wire tap.

Justice Ian Nordheimer ruled a month ago that the wire tap evidence had to be excluded because of problems with three applications the RCMP filed in 2011 to get court approval to use wiretaps.  This decision taken in January was subject to a publication ban until February 10th.

In the wire tap decision, Justice Nordheimer held:

“Reduced to its essentials, the information provided in the [wiretap applications] was nothing more than speculation, gossip and rumour. … Nothing that could fairly be referred to as direct factual evidence, to support the rumour and speculation, was provided or investigated. The information provided by the tipsters was hearsay (or worse) added to other hearsay.”

For more information about the background facts in Canada’s most significant Corruption of Foreign Public Officials Act case, it is important to read World Bank Group v. Wallace, [2016] 1 SCR 207, 2016 SCC 15 (CanLII).  In this case, the Supreme Court of Canada summarized in the head note certain facts relating to the evidence as follows:

“The RCMP then sought and obtained authorizations to intercept private communications in order to obtain direct evidence of the accused’s participation in corruption, as well as a search warrant. Sgt. D was assigned to prepare affidavits for the application. He largely relied on information the INT shared based on its communications with the tipsters, as well as knowledge of the bidding process of a senior investigator with INT. Sgt. D also spoke directly to one of the tipsters. Sgt. D did not make any handwritten notes of his work as affiant. All of his emails for the period of the investigation were lost because of a computer problem, though many were recovered through other sources.”

It is also necessary to review Drywall Acoustic Lathing and Insulation, Local 675 v. SNC-Lavalin Group Inc., 2015 ONCA 718 (CanLII) and Chowdhury v. H.M.Q., 2014 ONSC 2635 (CanLII).  While these cases are not about the charges against the three former executives, they do give background information about the underlying bribery allegations.

Without the wire tap evidence, the prosecution concluded there was not a prospect of conviction. The case against the individuals is now over – however the reputational damage against the individuals and the company (SNC-Lavalin) will continue.  All were convicted in the court of public opinion long ago.

It Is Best To Sever Ties With Representatives Who Commit Export Controls Infractions

Posted in Aerospace & Defence, Corporate Counsel, Cross-border deals, Cross-border trade, Export Controls & Economic Sanctions, Exports

missile-1On February 9, 2017, Stewart Bell wrote an article for the Financial Post entitled Canadian company investigating branch in Iraq after logo spotted in photos of missile test. It is never good to see your company name in the news – let alone being associated with a missile test in a country subject to United Nations sanctions. This story should cause Canadian companies, even companies which are not in the aerospace and defense industries, to revisit their internal controls or consider ways to improve their business practices.

Advanced Development Group Ltd. (“ADG”), a Canadian company, was surprised to see their corporate logo and name on a piece of equipment associated with a missile test in Iraq.  ADG is a construction company and not in the defense industries.  So, ADG was not the manufacturer of the missile technology.   How could their name be so prominently displayed in a photograph on a missile?  More importantly, was their foreign agent/representative responsible?

To control the reputational damage and prevent future non-compliance, the company immediately took important steps:

  1. ADG severed its relationship with its agent/representative in Iraq;
  2. ADG commenced an investigation (on the ground in Iraq); and
  3. ADG commenced an investigation of their internal controls in Canada.

The issues for the company to determine are:

  1. Whether their logo was used without permission by the company’s Iraq agent/foreign representative and was he selling goods manufactured by some other company (passing the goods off as manufactured by the Canadian company)?
  2. Whether the Canadian company’s goods (parts of goods) were in the photo?
  3. If the goods were Canadian goods, were they exported without an export permit required under the Export and Import Permits Act or were they properly exported and re-transferred or diverted?
  4. Were the goods exported from Canada subject to Canada’s economic sanctions under the United Nations Act and United Nations Iraq Regulations (Canada imposes a prohibition on the export of arms and related material to any person in Iraq)?

The company also has many internal compliance issues to resolve.  When there is one rogue representative, there may be more. If their is a gap in the compliance program, it must be filled.

Canadian companies doing business in Iraq should be aware and learn from the experience of ADG. Canadian, U.S. and Western European firms have an advantage when bidding on contracts in Iraq because of their reputation for quality.

This situation provides an excellent lesson in export controls corrective action.  When an issue is uncovered, it is important to sever the company’s relationship with any rogue agent/representative.  To maintain a relationship might be perceived as approval of the behaviour.  A message needs to be sent to all foreign representatives.  Further, all foreign agents and representatives should be provided with a compliance policy and asked to sign the policy acknowledging that the policy has been read.  Further, the company should offer training to foreign agents/ representatives so that they know what is expected of them and, more importantly, they know what is required under Canadian laws.  Agents/representatives in countries that are higher risk (e.g., they are subject to Canadian economic sanctions or regularly do business with countries subject to Canadian sanctions) should undergo a review to ensure there are no problems.

What is also important is looking at the internal controls in Canada.  In the ADG case, they should determine whether goods were shipped without an export permit.

For more information about Canada’s export controls and economic sanctions, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.

See also:

Why Should You Know About Canada’s Economic Sanctions Laws?

What Is An Export Control List Item Number?

What is a Ministerial Authorization?

What is the Canadian Process for Voluntarily Disclosing Export Controls/Economic Sanctions Violations?

Ten Compliance Problems Canadian Companies Face In Complying With Canada’s Economic Sanctions Laws

 

 

Drugs and Bugs: The CBSA Watches Flower Imports Carefully

Posted in Agriculture, Border Security, Customs Law, Imports Restrictions

cop and flowersEvery year around Valentine’s Day (and Mother’s Day and Easter), the CBSA is extra busy inspecting shipments of flowers from Colombia and Ecuador.  Shipments of flowers into Canada are most commonly shipped by air or transported from the United States after importation through Miami.

The two things the CBSA is looking for in fresh cut flower shipments are drugs and bugs. Historically, cut flower shipments were used as a hiding place by South American drug smugglers.  As a result, the CBSA continues to monitor flower shipments closely.  The drugs are no just hidden is solid form under the flowers, liquid or solid drugs have been injected into the flowers themselves.

Importantly, the CBSA agriculture specialists look for bugs and pests that can damage Canada’s ecosystem and which might bring diseases into the homes of Canadians. The most common type of plant pests intercepted in cut flower imports are Noctuidae (Moths), Aphididae (Aphids), Frankliniella sp. (Thrips), and Tetranychus sp. (Mites).

Canadian importers of flowers must be very careful to buy from reputable sources.  The CBSA will seize and destroy shipments of flowers if they find a bug/pest.  As a result, the flower importer may lose the money paid to the exporter and not have product to sell during lucrative periods, such as Valentine’s Day.

Canadian importers of flowers must also be careful to purchase flowers from companies that have a secure supply chain.  The importer is usually the importer of record for customs purposes.  Therefore, the importer is the party who may be charged if the shipment includes drugs.  The CBSA may seize the drugs or the CBSA may allow the flowers to be delivered under a controlled shipment so that the evidence can be gathered for a successful prosecution.

So remember:

Roses are Red,

Roses are White,

If the CBSA finds bugs,

Something ain’t right.

Roses are Pink,

Roses are Blue,

If you import drugs,

The CBSA will take them from you.

 

 

What Should Justin Trudeau Say To Donald Trump?

Posted in Border Security, Buy America, Canada's Federal Government, Canada-EU CETA, Cross-border deals, Cross-border trade, U.S. Federal Government

Canada-US GlobeOn February 12, 2017, Justin Trudeau is traveling to Washington, D.C. to meet Donald Trump at the White House.  What will they talk about?  Hmmm – softwood lumber? Border adjustment tax? NAFTA renegotiation? Common interests? Jobs on both sides of the border? NEXUS Card revocations of Canadians and permanent residents of Canada? Supply management? Harmonization of regulations? Immigration changes? Canada’s plans for a free trade agreement with China?

There are many trade issues that will be discussed.  Most of the issues can be discussed from the perspective of common interests.  However, not all of Canada’s interests align with U.S. interests.  So, during this first meeting, Prime Minister Trudeau should focus on the good trade topics and not try to stir the pot with the most contentious issues.  Time will come for trade arguments and Canada-US trade tweets.

It is important to note that Prime Minister Trudeau will also be traveling to Europe next week for the ratification of the Canada-EU CETA in the EU Parliament.  Canada’s Bill C-30 An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures” was debated at third reading on February 8, 2017.  After Bill C-30 passes third reading in the House of Commons, it will move to the Senate.  Is should not be long before the Canada-EU CETA is ratified on both sides of the Atlantic and can come into effect. Canada is diversifying its trade options.  Canadian businesses can pursue trade opportunities in/with Europe. 

Next week can be a great trade news week – if only the discussion on Monday does not get off track.

The Canada Border Services Is Getting Authority To Open All Cross-Border Mail

Posted in Border Security, Canada's Federal Government, Corporate Counsel, Cross-border deals, Cross-border litigation, Cross-Border Real Estate, Cross-border trade, Currency Reporting, Customs Law, Legal Developments, Proceeds of Crime/Money Laundering, Tax

Sniffer DogThe Canada Border Services Agency (“CBSA”) has statutory authority in subsection 99(1) of the Customs Act to open goods that are being imported – this includes letters and packages. Currently, most packages can be opened, including legal documents sent by a law firm to another law firm or a client.  A few years ago I was surprised to see that the CBSA opened a package I received from Professor Henry King sending me a signed copy of his book.

Currently, many letters cannot be opened. Subsections 99(2) and 99(3) of the Customs Act currently restrict the CBSA’s power/authority to open mail – they cannot open mail weighing less than 30 grams (unless the person consents to the letter being opened).  However, this is about to change.  Subsections 99(2) and 99(3) of the Customs Act will be repealed if Bill C-37 “An Act to amend the Controlled Drugs and Substances Act and to make related amendments to other Acts” is passed (see Section 52 of Bill C-37).  Bill C-37 has received Second Reading in the House of Commons in Canada and is being reviewed by the Standing Committee on Health.

Bill C-37 addresses the serious fentanyl crisis.  CBSA officers use sniffer dogs and x-ray technology at international mail facilities in Canada.  The change contained in Bill C-37 is said to be needed because fentanyl is being sent by mail and a deadly dosage can be less than the 30 grams restriction.  As a result, the CBSA is not able to stop certain mail with fentanyl contained therein.  While no one would have difficulty with permitting the CBSA to stop deadly drugs crossing the border, the proposed change allows the CBSA to open any mail.  Lawyers letters can be opened (e.g, the CBSA can receive a look out from the Canada Revenue Agency or RCMP for letters from law firms in tax havens).  Letters shipping receipts can be opened (there have been many cases of Canadians taking a cruise and buying jewelry outside Canada and shipping the receipts home to avoid payment of duties).  Letters with currency or cheques or other financial instruments may be opened.  All of these letters can be opened without a warrant or a reasonable suspicion.

As previously indicated, section 52 of Bill C-37 repeals subsections 99(2) and 99(3) of the Customs Act, which provide:

“99(2) An officer may not open or cause to be opened any mail that is being imported or exported and that weighs thirty grams or less unless the person to whom it is addressed consents or the person who sent it has completed and attached to the mail a label in accordance with article RE 601 of the Letter Post Regulations of the Universal Postal Convention.

99(3) An officer may cause imported mail, or mail that is being exported, that weighs thirty grams or less to be opened in his or her presence by the person to whom it is addressed, the person who sent it or a person authorized by either of those persons.”

By removing both provisions in their entirety and without adding any reasonable suspicion of drug test or privacy threshold criteria, the CBSA will be able to open any mail.  This raises various privacy concerns, but also concerns about solicitor-client privilege.  General Counsel should be aware that letters, when sent by mail, can be opened by the CBSA.  There are no checks and balances to ensure letters are not photocopied or scanned or duplicated in some manner.  The letter will arrive with some indication that it has been opened, but there is no reference number so that a person can find out if the CBSA duplicated the contents of the envelope.

If you are concerned about the CBSA being able to read your mail, this is the time to speak up.  Section 52 of Bill C-37 is hidden and the ramifications are not clear unless you dig deeper.  This Bill may pass with good intentions and long term effects unrelated to finding fentanyl and other serious drugs.

For more information about the powers of the CBSA, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  See also the following articles about solicitor-client privilege at the border:

What Canadian Lawyers Should Know About Solicitor-Client Privilege At the Canada-US Border

What Canadian Corporate Counsel Should now About the NEXUS Program

Can the CBSA Ask For Your Passwords?

Solicitor-Client Privilege – Managing Risk at the Border

Thickening of the Border – What Is Canada’s Concern?

Posted in Border Security, Canada's Federal Government, Cross-border trade, Customs Law, Energy, Exports, Harmonization, Immigration law, Imports Restrictions, NEXUS, Politics, U.S. Supreme Court

Customs StopThe phrase “thickening of the border” equates with increased regulations and costs, which result in difficulties or slow-downs at the border such that goods and people move at the pace of molasses. Border wait times increase as new border charges are paid and shipments are inspected and border officers assess risks.  Any thickening of the border harms businesses on both sides of the Canada-United States border and ultimately increases the cost of goods for consumers.

Canadian businesses (e.g., manufacturers, shippers and truckers moving goods across the border) are rightly concerned that the Trump Administration, or the U.S Department of Homeland Security / U.S. Customs and Border Protection (“USCBP”) will implement new screening procedures at the Canada-US border that will slow down safe and secure trade.  For example, USCBP had revoked FAST (Fast and Secure Trade) memberships of some Canadian truck drivers with a connection to one of the 7 entry ban countries (Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen) who were vetted for entry into the FAST.  This means that those truckers will not be able to use the FAST truck lanes at the border and will have to use the regular lanes, which results in a longer wait time at the border. When there are more non-FAST trucks lining up at the border, this slows down passage for the FAST trucks because the infrastructure at the border creates a bottleneck at the divergence point.

While the FAST truck measure affects a limited number of trucks, it is the tip of the iceberg. If additional screening measures are implemented, trade at the border will slow.  Since 2001, Canada and the United States have worked hard at ensuring bilateral trade moves securely and quickly.  For example, Canada and the United States have been actively pursuing a two-pronged initiative in the form of the Beyond the Border Action Plan and the Regulatory Cooperation Council Action Plan.  See also the U.S-Canada Regulatory Cooperation Council website.

Further, if any border adjustment tax is implemented and must be collected at the border, trade will slow significantly in the future – especially if the taxes must be collected at the border at the time of clearance of the goods.  If the rules of origin in NAFTA are also changed so that many goods that were previously duty-free are now subject to duties, there will be a thickening of the border as paperwork concerning duties payable is filed and duties are paid.  If new inspection charges are implemented and inspections increased, the border-wait times will increase as more trucks for inspection fill the available spots at the border.

What can Canadian companies do to limit the effects of “thickening at the border”?

There is little that Canadian companies can do to stop the Trump Administration and USCBP from implementing new screening measures, regulations and fees.  However, Canadian companies can take a few steps that may hopefully reduce the effects of new border measures.

  1. Sign up for C-TPAT (Customs–Trade Partnership Against Terrorism), which is a voluntary, joint U.S. government-business partnership to help add to supply chain and increase border security.
  2. Sign up for PIP (Partners in Protection), which is a voluntary, joint Canadian government-business partnership to help add to supply chain and increase border security. For more information about PIP, see Canada’s Partners in Protection Program and Join Canada’s Partners in Protection Program.
  3. Individuals who travel often for business should apply for the NEXUS Program.
  4. Sign up for FAST (Fast and Secure Trade), which facilitates cross border trade by pre-approved and security-cleared carriers, importers and drivers.
  5. Sign up for EDI (Electronic Data Interchange) in Canada and the United States, which allows cargo reporting, release, entry and accounting to occur electronically.
  6. Inform Canada of U.S. regulations that create bottlenecks at the Canada-US border.  Canada will be discussing improvements to NAFTA (also known as the renegotiation of NAFTA). The Trump Administration is also reducing regulatory borders, This presents a great opportunity to reduce regulations that slow bilateral trade.
  7. Conduct an internal customs compliance audit to ensure that your customs paperwork is accurate. This includes reviewing H.S. Codes used, certificates of origin and valuation.
  8. Drivers should “know their load”.  Sometimes USCBP has questions and the 10 minutes it takes for a driver to ask questions about the goods being transported can save hours at the border.  Also, if the driver is carrying a load with multiple goods, knowing where goods are located in the truck can save time during the inspection process if the border officers are only interested in certain goods.  Being able to inform the border officers of the location of the goods at issue may save hours during the inspection.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.