Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

U.S. Demand For Local Content Rules of Origin for Autos May Be Contrary to GATT 1994 Article XXIV

Posted in NAFTA Renegotiations, World Trade Organization

Article XXIV of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”) (and the Understanding on the Interpretation of GATT Article XXIV of the General Agreement on Tariffs and Trade 1994) may prevent some of the U.S. demands made at the start of the NAFTA modernization/renegotiation talks this week.  Article XXIV of GATT 1994 must be reviewed and understood.  It may be the key to stopping President Trump’s and USTR Lighthizer’s requested changes to the autos rules of origin and U.S. content requirements.  Let’s be clear, the ask would suggest that duties would be applicable to any autos originating in Canada or Mexico that do not meet certain unreasonable regional value content requirements and local U.S. content requirements.

NAFTA creates a free trade area as opposed to a customs union, like the European Union.  Article XXIV:5(b) of GATT 1994 provides:

“with respect to a free-trade area, or an interim agreement leading to the formation of a free-trade area, the duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of such free–trade area or the adoption of such interim agreement to the trade of contracting parties not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area, or interim agreement as the case may be.” (emphasis added)

Article XXIV:8(b) of GATT 1994 provides:

“For the purposes of this Agreement … A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.” (emphasis added)

Looking at these two provisions combined, trade cannot become more restrictive in a free trade agreement AND duties and other restrictive regulations of commerce must be eliminated on substantially all the trade.  Since the auto industry in North America constitutes a large portion of the trade between Canada and the United States and Mexico and the United States, adding new duties (removing eliminated duties) may be contrary to Article XXIV of GATT 1994.

If you consider that NAFTA, as it is currently implemented, does not eliminate all duties (so, we are already in a position on the line of “substantially all trade”), any new duties or reversing of elimination of duties, would push NAFTA into Article XXIV of GATT 1994 non-compliance.  This means that changes to remove eliminated duties could taint the entire NAFTA and cause other WTO Members to challenge any resulting modernized NAFTA at the WTO and cause the WTO DSB/Appellate Body to demand changes.  Other countries (such as South Korea or a EU country) may just take this WTO disputes settlement step if they think the USTR strategy is to force them to agree to the same restrictive rules of origin.

For more information about the NAFTA modernization, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  There are other articles on the LexSage website about the NAFTA.

The Canada Border Services Agency Has Authority To Seize Hate Propaganda

Posted in Border Security, Canada's Federal Government, Customs Law, tariff classification

The Canada Border Services Agency (“CBSA”) is the gatekeeper and hate propaganda is a prohibited importation under item 9899.00.00.00 of the Customs Tariff (Canada).  Don’t bring hate propaganda to Canada and do not send hate propaganda to Canada and don’t attempt to import hate propaganda into Canada – unless you would like the CBSA to seize it and destroy it. See “Border guards stop hundreds of ‘obscene items'”.

A person cannot import into Canada books, printed paper, drawings, paintings, prints, photographs or representations of any kind that constitute hate propaganda within the meaning of subsection 320(8) of the Criminal Code.  “Hate propaganda” is defined in subsection 320(8) of the Criminal Code to mean “any writing, sign or visible representation that advocates or promotes genocide or the communication of which by any person would constitute an offence under section 319”. Subsection 319(1) of the Criminal Code criminalizes “communicating statements in any public place, incites hatred against any identifiable group where such incitement is likely to lead to a breach of the peace”.  Subsection 319(2) of the Criminal Code criminalizes “communicating statements, other than in private conversation, wilfully promotes hatred against any identifiable group”.  The term “identifiable group” is defined in section 218 of the Criminal Code to mean “any section of the public distinguished by colour, race, religion, national or ethnic origin, age, sex, sexual orientation, gender identity or expression, or mental or physical disability.”

The CBSA’s policies against the importation of hate propaganda are set out in D-Memorandum D9-1-15 “Canada Border Services Agency’s Policy on the Classification of Hate Propaganda, Sedition and Treason” and D- Memorandum D9-1-17 “Canada Border Services Agency’s Determination Procedures for Obscenity and Hate Propaganda”.

The CBSA’s policies provide further guidance on what may be considered to be hate propaganda.  The CBSA considers to be hate propaganda goods that contain depictions and/or descriptions that advocate or promote genocide or that publicly incite or willfully promote hatred against an identifiable group, distinguished by colour, race, religion, national or ethnic origin, age, sex, sexual orientation, gender identity or expression, or mental or physical disability.  Further, goods may be prohibited as hate propaganda if they advocate or promote the genocide of an identifiable group. Genocide is defined as acts committed with the intent to destroy, in whole or in part, an identifiable group, either by killing members of the group or by deliberately inflicting on the group conditions of life calculated to bring about its physical destruction.  Further, goods that incite or promote hatred against an identifiable group, by incorporating some or all of the following allegations, may be prohibited as hate propaganda:

(a) allegations that an identifiable group is to blame for serious economic or social problems;

(b) allegations that an identifiable group manipulates media, trade, finance, government or world politics to the detriment of society;

(c) allegations that an identifiable group is inferior or superior to another group; and/or

(d) allegations that an identifiable group weakens or threatens society, in whole or in part.

The above list contains examples, but the list is not limited to these allegations.  The CBSA will know hate propaganda when they see it.

The CBSA will make a tariff classification determination whether the goods are hate propaganda or not hate propaganda. In other words, the CBSA will make a classification decision whether the tariff classification is 9899.00.00.00.  The CBSA will make a determination whether the materials target an identifiable group.  If they appear to target an identifiable group, the goods most likely will be detained. In making this determination, the CBSA will look at other determinations contained in the internal Technical Reference System (TRS) (this database is not available for the public to search). All suspect goods not found in the TRS and requiring a determination must be detained and forwarded to the Prohibited Importations Unit (PIU) at Headquarters in Ottawa, where the determination will be made. The TRS is a part of the Customs Commercial System (CCS) and identifies material that has previously been determined by the PIU.

Suspect material takes many forms, including written, visual and audio materials. This commonly includes DVDs, books, graphic novels, magazines and electronic devices.  The CBSA may also target laptops and other electronic devices.  If hate propaganda is contained on an electronic device, that electronic device may be seized.  For example, in 2016, a Canadian had her laptop seized by the CBSA (in addition to paper documents in her possession, when she returned from Germany.  See “Ontario teen who called for ‘white” Canada has laptop seized by CBSA”.  Please also review Can the Canada Border Services Agency Search Electronic Devices?

It is possible to appeal a tariff classification determination that goods are hate propaganda and a prohibited importation. The request for review must be filed within 90 days of the determination that the goods are classified under tariff code 9899.00.00.00.  However, the goods will remain in CBSA custody until their decision is overturned by the Canadian International Trade Tribunal or Federal Court of Appeal or Supreme Court of Canada.  This process will take many years.

So, it is best to err of the side of caution and not bring to Canada, send to Canada, or import into Canada goods that the CBSA may consider to be hate propaganda.  Canadian values will be applied in making the determination whether the goods constitute hate propaganda.  Decisions can be influenced by current events that impact on Canada’s views on what is and what is not hateful.  Items that breach the “community standard of tolerance” most likely will be considered to be hate propaganda.

Canada does not permit unfettered freedom of expression.  Section 1 of the Charter of Rights and Freedoms sets reasonable limits of guaranteed rights. Section 1 provides:

“The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.”

Limits on hate speech and hate propaganda are justified in a free and democratic Canada – in my Canada.

Canada is a multi-cultural society.  Canada is a tolerant society. There is no place in Canada for hate propaganda of any form of white supremacists, nazis, neo–nazis, racists and other groups who target other human beings. There is no place in Canada for hate propaganda that incites violence against our fellow man/woman/transgender persons/non-gender persons.  To be blunt, Canadians and Canadian residents do not want hate propaganda crossing the Canadian border.  I denounce those who create hate propaganda and do not want it in my society.  The CBSA works for all of us to keep this vile and disgusting garbage out of Canada.  I am grateful for the CBSA officers who must see this reprehensible trash so that I do not have to come into contact with it.

Can the CBSA Search My Electronic Devices?

Posted in Border Security, Canada's Federal Government, Corporate Counsel, Cross-border trade, Customs Law

We are often contacted by travelers after they have been selected (random or mandatory) for a secondary examination by the Canada Border Services Agency (“CBSA”) upon arrival at the Canadian border. Usually, the traveler had something on a laptop computer or smart phone that they did not want the CBSA to see or use against them in a court of law (for example, prohibited materials (e.g., child pornography or obscene materials (e.g., hate propaganda)), evidence of under declaration of goods, evidence of false invoices, evidence of drug use or trafficking, naked photos, etc.).  They often ask whether the CBSA was allowed to conduct such invasive searches of their electronic devices.

The CBSA does have authority to search electronic devices.  The CBSA may examine the baggage of any incoming passenger. Section 98 of the Customs Act (Canada) grants CBSA officers broad authority to conduct examinations.  Section 99 of the Customs Act (Canada) grants CBSA officers the authority to search “any goods that [have] been imported…”  The term “goods” is defined in subsection 2(1) of the Customs Act (Canada) to include “any document in any form”.  This means that the CBSA may examine paper documents and electronic documents and other forms of documents.

The CBSA has a written internal policy (CBSA Operational Bulletin PRG 2015-31 “Examination of Digital Devices and Media at Port of Entry”) that is not published on the CBSA web-site, but is available through Access to Information process.  CBSA Operational Bulletin PRG 2015-31 indicates the following:

  1. It is the CBSA’s administrative position is that electronic devices, digital devices and media, along with digital documents and software are goods;
  2. The CBSA takes the position they may examine electronic devices, digital devices and media that re imported into Canada;
  3. While there is no legislated threshold (e.g. reasonable belief of criminal activity requirement), the CBSA’s current policy is that examinations of electronic devices will not be conducted as a matter of routine;
  4. The CBSA’s current policy is that examinations of electronic devices will be conducted if there is a multiplicity of indicators that evidence of a contravention may be found on the electronic device);
  5. The CBSA’s current policy is that where undeclared goods, prohibited goods or falsely declared goods are discovered, CBSA officers are authorized to conduct a progressive examination of electronic devices for evidence to support allegations of a contravention;
  6. The CBSA’s current policy is that examination of electronic devices “must always be performed with a clear nexus to administering or enforcing CBSA-mandated program legislation”;
  7. The CBSA’s current policy is that the CBSA should not examine electronic devices with the sole purpose of looking for evidence of criminal activity (of a domestic law nature as opposed to a customs law nature);
  8. CBSA officers must be able to explain their reasoning when they conduct an examination of an electronic device AND their Narrative Report or handwritten notes MUST “clearly articulate the types of data they examined, and their reason for doing so”.  CBSA officers must also note what indicators lead to a more extensive examination;
  9. CBSA officers must conduct examinations of electronic devices with as much respect for privacy as possible “considering that these examinations are usually more personal in nature than baggage examinations”. For example, if naked photos are discovered, they should be closed if they are not obscene or are evidence of the importation of child pornography;
  10. The initial review should be cursory in nature and increase in intensity if indicators emerge during the examination; and
  11. The CBSA officers should disconnect connectivity to the internet so that they cannot read incoming texts and emails that were not in the possession of the traveler at the time of importation of the device.

CBSA Operational Bulletin PRG 2015-3 also addresses the issue of passwords:

  1. The CBSA should not permit the traveler to input their password into the electronic device (that is, they must give the password to the CBSA officer to input into the device);
  2. The CBSA must record passwords provided;
  3. If the CBSA officer detects a contravention, he/she should deactivate the password protections on the device;
  4. CBSA officers should not ask for passwords for other types of accounts (such as professional accounts, social media accounts, etc.);
  5. CBSA officers should not ask for passwords for information stored online (e.g., webmail accounts, gmail accounts, bank accounts, eBay accounts, etc.);
  6. The CBSA may ask for travelers to voluntarily provide information and passwords to information stored online, but notify the traveler that he/she is under no obligation to provide it;
  7. The CBSA may detain electronic devices is the traveler does not provide passwords or is unable to retrieve information and must complete a Notice of Detention (K26 Form); and
  8. The CBSA shall not arrest a traveler for failure to provide a password.

For more information about the CBSA’s examination powers, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  Other useful documents are posted on the LexSage web-site.  The best place to look on the LexSage website is under Customs articles and University of Windsor course materials “NEXUS/Border Infractions“.

The CBSA Should Respect Solicitor-Client Privilege At The Canadian Border

Posted in Canada's Federal Government, Corporate Counsel, Cross-border trade, Customs Law

The Canada Border Services Agency (“CBSA”) does have an internal policy with respect to examinations and searches of lawyers who are crossing the border into Canada.  This internal policy (Operational Bulletin PRG-2014-07 “Examination of Solicitor-Client Privileged Materials”) is not publicly available on the CBSA web-site, so we posted it.  It is available through Access to Information.

In the Operational Bulletin, CBSA officers are instructed to treat documents, electronic or otherwise, which are protected by solicitor-client privilege, with sensitivity.  This includes printed documents in a lawyer’s briefcase (or a client’s briefcase), printed documents sent by mail or courier, electronic documents on a computer, smart phone or other electronic device.

The CBSA limits the policy to documents clearly marked as “Solicitor-Client Privilege” or are addressed to/from a law firm or lawyer’s office, or are in the possession of a lawyer.  What this means is that lawyers should take greater care to mark sensitive documents so that there is no confusion about whether the document is subject to solicitor-client privilege. It also means that the CBSA officers will not know to treat many documents in a sensitive manner as many documents are not stamped “Solicitor-Client Privilege” and they do not know the names of every law firm or lawyer in Canada and outside Canada.

The policy does apply when a traveler claims that documents are covered by solicitor-client privilege.  So, it is important to speak up early during the examination process and claim privilege.

The policy states that CBSA officers “will not normally open these materials”.  However, if the CBSA officer has reason to believe that a computer or electronic device contains prohibited materials (e.g. child pornography, offensive materials, hate speech, etc.), the CBSA officer may conduct an examinations notwithstanding the claim of privilege.  Computers, briefcases, letters, package, etc. may be examined when the CBSA officer believes that the computer, briefcase, letter, package, etc. also include documents that are not subject to privilege. The CBSA officer is authorized by the Operational Bulletin to open the computer, briefcase, letter, package, etc. to determine admissibility, tariff treatment or presence of contraband, unreported goods and falsely reported goods. Documents that are not subject to solicitor-client privilege may be seized.

It is important to note that where solicitor-client privilege is claimed and the CBSA officer has reason to believe that the documents/electronic device contains contraband or evidence of wrongdoing, the CBSA officer is instructed by the policy to seal the documents of electronic device in an evidence bag without examining the documents or electronic device.  What the Operational Bulletin fails to state is the process that will be followed after the documents and/or electronic device is placed in the evidence bag.  All that the Operational Bulletin states is that the evidence bag will be put aside to be reviewed by a court tasked with reviewing solicitor-client privilege claims.

Currently, the CBSA cannot open packages/letters that weigh less than 30 grams and may open mailed and couriered packages that exceed 30 grams.  A different CBSA policy (CBSA Enforcement Manual, Part 4, Chapter 12, sets out that the CBSA should not normally open mail and couriered documents (that is, packages that clearly contain only documents) from a law firm or lawyer or that are being sent to a law firm or lawyer.  What this means is that such mailed or couriered packages should be clearly stamped “SUBJECT TO SOLICITOR-CLIENT PRIVILEGE”.  If the package arrives opened (which has happened in my personal experience), action can be taken against the CBSA.  It is important to know that the CBSA may scan any document sent by mail or courier (if the package weighs more than 30 grams).

The CBSA takes the position that invoices, passports, packages that contain commercial or casual goods, etc. are not subject to solicitor-client privilege.  As a result, lawyers must be careful in what they send to clients when the goods/documents physically cross the Canadian border.  A different CBSA policy states that the CBSA officer must consider the following:

“In order for the privilege to apply, the following conditions must be met:

  1. there must be a communication between a client (or their agent) and a legal advisor;
  2. the communication entails the seeking or giving of legal advice; and
  3. the communication is intended by the parties to be confidential.”

The CBSA Enforcement Manual notes that there are exceptions to solicitor-client privilege, such as when the client seeks guidance from a lawyer in order to facilitate a commission of a fraud or crime.

The CBSA Enforcement Manual recommends that the CBSA officer contact Legal Services (or another appropriate section of the CBSA) where privilege is claimed or potentially applicable. CBSA officers are instructed to:

  • ensure another officer is available to witness and to sign the appropriate form IMM 5242B;
  • ensure the client understands and observes the process;
  • have the client sign the appropriate form;
  • ensure that notification is given to the lawful owner of the documents;
  • limit the contamination factor by sealing the item and not allowing others to view or handle the seized items; and
  • report procedures on file and/or update FOSS.

If a traveler waives privilege, the CBSA officer should get the waiver in writing.  Our recommendation to lawyers is that they should not waive privilege in order to expedite the examination process unless they have permission from their client.

For more information about the CBSA’s examination powers and solicitor-client privilege, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  Other useful documents are posted on the LexSage web-site.  The best place to look on the LexSage website is under Customs articles and University of Windsor course materials “NEXUS/Border Infractions“.

 

Canada Releases List of NAFTA Modernization “Core Objectives”

Posted in NAFTA Chapter 11, NAFTA Renegotiations

On August 14, 2017, Canada’s Foreign Affairs Minister, Chrystia Freeland delivered Canada’s list of NAFTA Modernization (note, not “renegotiation”) “core objectives”.  Minister Freeland stresses that Canada’s mission is a modern and progressive free trade agreement.  She stressed that “Trade is about people” and jobs in Canada and Canada’s NAFTA partners.  Canada’s approach will be to “make what is already a good agreement, even better”. This is the correct objective.

However, Minister Freeland provided the following list of “core objectives” as the means to achieve a great agreement:

  1. Modernize NAFTA, including addressing the trade in the technology sector (this means Canada must add rules of origin for new technologies, add a chapter on E-Commerce, add technology and artificial intelligence services to the Services Chapter 12, add technology based service providers to NAFTA Chapter 16, etc.);
  2. Make NAFTA more progressive by adding a chapter on Environment (move the Side Letter on Environment into the NAFTA and modernizing it) and including Climate Change in that chapter;
  3. Make NAFTA more progressive by adding a chapter of Labour (move the Side Letter on Labour into the NAFTA and modernizing it);
  4. Make NAFTA more progressive by adding a chapter on Gender Rights (Minister Freeland gives the Canada-Chile FTA Modernization Chapter on ‘Trade and Gender” as a precedent);
  5. Make NAFTA more progressive by adding  an Indigenous Chapter (when pressed, Minister Freeland could not describe what sorts of provisions would be in an Indigeneous Chapter);
  6. Make NAFTA more progressive by improving NAFTA Chapter 11  dispute settlement provisions to further ensure governments may regulate in the public interest;
  7. Modernize NAFTA by making life easier for business people by cutting red tape (e.g., reduce compliance burdens) and harmonizing regulations (aka regulatory alignment) (a continuation and elevation of the U.S.-Canada Regulatory Council initiatives);
  8. Procurement Liberalization: Increase covered procurements in NAFTA Chapter 10 “Government Procurement” to cover state and local procurements and reduce use of local-content provisions on major government contracts;
  9. Modernize NAFTA Chapter 16 “Temporary Entry for Business Persons” to evolve and lengthen the list of covered professionals who may enter a NAFTA Party without the need for labour market studies (that is, fewer immigration visas for Canadians wanting to working in the USA on a temporary basis);
  10. Preserve supply management policies;
  11. Preserve NAFTA Chapter 19;
  12. Preserve exemption of Canadian companies in global safeguard actions in a NAFTA Party; and
  13. Preserve Canadian cultural exception in NAFTA Chapter 21.

What is missing from the Canadian list of “core objectives”:

  1. Including the States and Provinces/Territories in the negotiation process (this is one core objective that Canada agreed to in the Canada-European Union CETA negotiations and it should be included in the NAFTA Modernization negotiations so that States can speak up in terms of trade with Canada);
  2. Modernization of the rules of origin;
  3. Preserve access of Canadian meat and agricultural goods to US markets;
  4. Modernization of sanitary and phyto-sanitary measures;
  5. Modernization of conformity assessment procedures (that is, where the U.S. and Mexico would accept Canadian testing and certifications and not require duplication);
  6. Elimination of continued technical barriers to trade (e.g., U.S. domestic policies that limit access of Canadian wine to store shelves);
  7. Modernization of NAFTA Chapter 12 “Services” to establish a negative list and to address technology and innovation services, including integrated research and development;
  8. Modernization of the border facilitation provisions in NAFTA Chapter 3;
  9. Modernization of provisions on border security (e.g., an evolution of the Beyond the Border Initiative);
  10. Modernization of NAFTA Chapter 6 “Energy and Basic Petrochemicals” to remove proportionality requirement and include natural gas and fracking;
  11. Solution to the Softwood Lumber Dispute;
  12. The development of a permanent investment dispute body (similar to what is being discussed with Europe);
  13. Addition of a Chapter on shared infrastructure and shared waterways;
  14. Modernization of provisions relating to border measures relating to illegal drugs from Mexico; and
  15. A Chapter to address trade in legalized drugs, such as cannabis.

Over the next few weeks and months, the details will emerge as to what is and is not included in Canada’s objectives.

For more information about the NAFTA modernization, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  There are other articles on the LexSage website about the NAFTA.

What is in a Name?

Posted in Border Security, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Exports, Government Procurement, Imports Restrictions, Legal Developments, Trade Agreeements, Trade Remedies, Uncategorized

Originally published by the Journal of Commerce in August 2017.

We are now a few months (almost 7) into Mr. Trump’s Presidency and it is still not clear  – what is the Administration’s trade policy?   The general press is rife with stories about the warring factions within the Administration – those who xenophobically want to turn inward and those who view issues through a global prism.  There are, so far, only a handful of tangible signals to point to – withdrawal from the TransPacific Partnership;  notice to Congress, Mexico and Canada to renegotiate NAFTA; withdrawal from the Paris Climate Accord; and this weekend’s U.S. led passage (jointly with China and Russia) of additional sanctions against North Korea.  Let’s be honest – this is too small a sample to be able to reliably read the tea leaves, even if you include the proposed cut in budget and redirection for the Dept. of Commerce, and the proposed cut in budget and staff at the Dept. of State!

The U.N. sanctions against North Korea would not have been possible if China and Russia did not view further action in their own self-interest.  Typically one or the other country vetoes U.S. action with which it disagrees.  Resolution 2371 (2017) targets the main exports giving hard currency to North Korea – including seafood, lead ore, coal, iron, iron ore and lead.  The resolution also calls on member countries to not issue any additional work permits to North Korean workers.  Given the efforts of that regime to build nuclear capability, this vote by all was one focused on national security but also world security.  It cannot be seen as a harbinger of President Trump’s trade policy, except when viewed as building on the recently enacted “Countering America’s Adversaries Through Sanctions Act”, but then that bill was passed in both Congressional houses by a veto proof majority.   It enhances the sanctions imposed on Russia, Iran and North Korea, but does so in a way that makes trade with China more challenging . More details can be found here: https://blogmsk.com/2017/08/02/trading-with-china-new-reasons-to-be-wary/.  Companies will need to upgrade their compliance programs to root out any North Korean origin inputs in goods originating in China and imported into the U.S., but also resales by Chinese companies to North Korean buyers of U.S. exports.  Due to the international nature of these latest sanctions, the onus regarding North Korea applies equally to all countries, but that does not make it any easier for American companies to conduct their due diligence.

The exact text of the resolution was not released as we went to press, but the U.N. website indicates Saturday’s action also prohibits the opening of new joint ventures or cooperative entities or the expansion of existing joint ventures through additional investments unless approved by the U.N.  Nine individuals and four entities were subjected to a travel ban and asset freeze already in place, plus a request to the International Criminal Police Organization (INTERPOL) to issue special notices regarding the named individuals. The purpose of the special notice is to notify law enforcement in each country these individuals are subject to a UN sanction which permits local law enforcement to take action in accord with each country’s laws.

Also included in the U.N. resolution is to identify any vessels involved in evading prior U.N. sanctions. The U.N. also encouraged a resumption of the six party talks. Those involved China, Japan, South Korea, Russia, North Korea and the United States  and are aimed at: “…  a verifiable and peaceful denuclearization of the Korean Peninsula”.

In a Wall Street Journal® opinion column published on August 1, 2017, Commerce Secretary Wilbur Ross took issue with those who claim the approach of the Trump Administration is protectionism.  Particularly mentioned were the actions of China and the EU regarding tariff and non-tariff barriers.  While admitting the trading rules and rates of duty in the EU are quite different from those in China, Mr. Ross (no relation) nonetheless took issue with the “onerous and opaque procedures for registering and gaining certification for imports, unscientific sanitary rules, especially with regard to agricultural goods; requirements that companies build local factories; and forced technology transfers…”  Mr. Ross also mentioned both blocs as “bankroll[ing] their exports through grants, low-cost loans, energy subsidies , special value-added tax refunds, and below-market real-estate sales and leases, among other means”.

While everyone of Mr. Ross’ objections is valid,  the rules in other countries are typically quite opaque and so far less open and even handed, his argument overlooks the U.S. has taken similar measures.   The four most protected industries in the U.S. are steel, auto and auto parts, textiles and wearing apparel and footwear. They were for years protected by high tariffs, quotas and complicated rules of origin. They still enjoy a degree of protectionism today with complex rules of origin and even some high rates of duty. Only the quotas are gone. These industries are also in many ways the least competitive ones in the U.S.  In reality, the major players in each of these industries and may other industries produce primarily outside the U.S. The notable exception is auto and auto parts, whose companies, in today’s market are primarily foreign, although the Big 3 auto makers are significant, but even they are able to maintain their strength, in part, relying on foreign production and foreign sales.

Each of these industries – steel, auto and auto parts, textiles and wearing apparel and footwear – has undergone rapid and dramatic change by expanding onto the global stage. The U.S. also enjoys remarkably low duty rates. The average duty rate in the U.S. is still quoted to be 2.5%. No one is suggesting that duty rates should go through the roof!  No one is suggesting that Ex-Im Bank and similar loans should not be done away with.  Local content requirements can be valuable, but certainly not to the extent that has been required by some trading partners. The stories are legend about requirements in China for local partners (which vary by province) where the office space is large but unoccupied simply to comply with certain local content and hire  requirements.   The question is how do you get the attention of other countries to change their rules?

One point where Mr. Ross is correct is the World Trade Organization does need to change.  He states:  “The WTO should protect free and fair trade among nations, not attack those trade remedies necessary to ensure a legal playing field…”  The challenge to getting any institution to change is, like so many other institutions, domestic and international, the WTO operates as a democracy. As such, its 164 members each vote in their own self-interest, and let’s be honest, that includes the U.S. Therefore, the question for Mr. Ross and the entire Trump Administration is how are you going convince WTO members to change?

Perhaps Friday’s expected announcement regarding trade with China and the supposed 301 investigation for intellectual property (and perhaps other ) alleged violations which may be initiated, might tell us something once the 301 investigation is concluded and the anticipated trade sanctions on China re imposed. However, to this point, it appears the answer is to seek ways in which to “make American great again”! Regretfully, in these admittedly few months of the new Administration,  it is still not clear what that really means. Stay tuned for what follows!

Gamblers Are Often Stopped By The CBSA Who Ask Questions If Winnings Are Proceeds Of Crime

Posted in NEXUS, Proceeds of Crime/Money Laundering

If you are a Canadian citizen or Canadian resident and have been lucky in Las Vegas, Atlantic City, Paradise Island, Macau or other gambling destinations, be prepared to be asked questions by the Canada Border Services Agency (“CBSA”) when you return to Canada with your winnings. The CBSA sees a large amount of money and often thinks the worst about the person.The CBSA has stepped up seizures of currency in the last two years.

First and foremost, if you return to Canada with currency and/or financial instruments in excess of $CDN 10,000, you MUST report the currency/financial instruments to the CBSA.  If you do not report the currency and financial instruments, the entire amount may be seized and kept as forfeit (yes, the Government of Canada can take the money and not give it back to you).  The CBSA has discretion to levy a fine in the amount of $250 (for first failure to declare funds determined to be from legitimate sources AND the funds are not concealed AND you are truthful to the CBSA) or $2500 (for a second failure to declare funds or if you concealed the funds or you are not truthful to the CBSA) or $5,000 (for a third failure to declare funds or if you concealed the funds or you are not truthful to the CBSA) or the entire amount is seized.  So, it is better to declare the money een though this means you must visit wit the CBSA to compete paperwork.

That being said, the CBSA may always seized the funds (reported or not) if the CBSA officer is of the view that the funds are not from legitimate sources.  What we are seeing is that the CBSA seizes gambling winnings if it cannot be shown at the time of importation that the winnings are legitimate.  In some cases, the CBSA gives the traveler a hard time and can make very snide remarks.  The CBSA is testing your story (which should be truthful – if you won money in Las Vegas, tell the CBSA).  The problem is that many travelers do not have sufficient paperwork from the casino when they return to Canada becasue they did not know it was important – they know they won the money at a legal premises.

If the CBSA seizes currency and financial instruments, you can seek a review of that decision within 90 days of the seizure.  We have successfully demonstrated that gambling winnings are from legitimate sources (e.g., the funds were paid by a casino) and the CBSA returned the funds.  Sometimes, it is necessary to show that the original monies taken by the traveler on the gambling holiday were from legitimate sources (e.g., taken from a bank account).  Sometimes it is necessary to show the funds in the bank account were from legitimate sources (e.g., a paycheck by a Canadian employer).  Each case is different as to what evidence will be required to show that finds are from a legitimate source.  What is important to know is that the Recourse Directorate (not the BSA officer at the border) reviews the file and may determine that evidence is sufficient to demonstrate the currency/financial instruments are not proceeds of crime.

The CBSA often seizes NEXUS cards when seizing unreported currency.  There is a separate process to seek a review of a NEXUS Card cancellation/revocation.  Please see How Can I Get My NEXUS Card Back When It IS Confiscated/Cancelled By the CBSA?

If you require assistance from a lawyer because the NEXUS privileges are important to you, please contact Cyndee Todgham Cherniak at 416-307-4168. More information about NEXUS confiscations and appeals is posted on the LexSage website.

Do You Know The Canadian Marking And Labelling Rules For Importing Textile Products Into Canada?

Posted in Canada's Federal Government, Cross-border trade, Customs Law, origin

There are several pieces of Canadian legislation that prescribe marking and labelling requirements for textile products that are imported into Canada.  While it is difficult to provide specific requirements without detailed information about the product, and certain exemptions may be available, the manufacturer, importer, target market, etc, the following marking/labelling requirements may apply:

1) Country of Origin marking on a sufficiently permanent label;

2) Dealer Information (name and full postal address where the dealer normally carries on business).  It is likely that the importer would be considered to be a Dealer and if located in Canada, consideration should be given to securing an identification number from the Competition Bureau;

3) Fibre Content information that meets detailed requirements set out in the legislation.  You will need to have details about the fibre make-up of the material used to manufacture the textile product, including any trim, lining etc.;

4) Product Care information is not mandatory but if it is included on your label, it must be accurate.  Any other information that appears on your label also must be accurate.  It cannot be misleading to a consumer; and

5) Certain of the marking/labelling laws require bilingual labelling.  Products sold in Quebec are likely to require a fully bilingual label.
As the importer of a finished textile product, you will be responsible to ensure that the products meet all Canadian regulatory requirements, including the labelling and marking requirements. If they do not meet the requirements, they may be seized at the border and stiff penalties can be applied (fines and/or imprisonment in certain circumstances).

A detailed assessment of your product plans must be undertaken to determine the specific labelling requirements that apply. You also need to thoroughly review any other regulatory requirements relating to the product, its tariff classification, valuation, product safety & flammability requirements etc .

Should you have any questions or would like assistance applying Canada’s labelling rules, please do not hesitate to contact Heather Innes at 416-350-1234 or heather@lexsage.com.

Canada-EU CETA Will Eliminate Duties On Medical Devices

Posted in Canada-EU CETA

Let the sales begin!  On September 21, 2017, the Canada-European Union Comprehensive Economic and Trade Agreement (“Canada-EU CETA”) will come into provisional effect.  The tariff elimination and tariff reductions commitments will come into effect, including the duty-free treatment for medical devices.  Canada has advanced medical device technology, as does the EU.

This means that, starting on September 21, 2017, Canadian businesses may sell Canadian-origin medical devices on a duty-free basis to the EU countries (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom) and additional territories (Andorra, the Åland Island, French Guiana, Guadeloupe, Martinique, Mayotte, Réunion, Saint Bartélemy and Saint Martin, the island of Heligoland and the territory of Büsingen, Mount Athos, the Azores and Madeira, Ceuta and Melilia and the Canary Islands, the Channel Islands, Gibralter, Isle of Man and the Sovereign Base Areas of Akrotiri and Dhekelia).  Canadian importers can also import EU-origin medical devices (not transshipped via a third country) on a duty-free basis on and after September 21, 2017.

The Government of Canada has posted examples of the tariff eliminations on medical devices:

  • x-ray generators = 0% (was 2.1%)
  • x-ray tubes = 0% (was 2.1%)
  • thermometers and pyrometers =0% (was 3.2%)
  • spectacles (eye glasses) = 0% (was 2.9% or 3%)
  • surgical and medical gloves = 0% (was 2.0%)

Some of the more significant Canadian-origin medical devices that will be duty-free include glucometers, insulin pumps, ventilators, imaging technology, catheters, stimulators, electrodes, surgical adhesions, etc.

The duty elimination will also assist Canadian medical service providers who will be on an equal footing as their EU counterparts.  The Canadian-origin medical devices used by the Canadian health care service providers will be duty free (just as there is no duties within the EU on EU-origin medical devices.

In addition, Canadian medical device design and development service providers will have improved opportunities to work with EU-based companies that can benefit from Canadian know-how and development expertise. EU-based companies and health care providers can work side-by-side with Canadian companies.  Researchers can collaborate.  Medical schools and hospitals can form partnerships to develop life-saving medical devices.

Furthermore, the labour mobility provisions in Chapter 10 “Temporary entry and stay of natural persons for business purposes” of the Canada-EU CETA will benefit health care service providers and business persons travelling to the EU to demonstrate and sell Canadian made medical devices.

We have written another article about the questions you should be asking if you would like to take advantage of CETA benefits.

For more information about the Canada-EU CETA, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  There are other articles on the LexSage website about the Canada-EU CETA.