Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

The ABCs of Canada’s Export Controls and Economic Sanctions Laws

Posted in Export Controls & Economic Sanctions, Exports

food for thoughtMost SMEs (and many larger companies also) have little familiarity with Canada’s export controls and economics laws.  Many business persons ship first and ask questions later as they do not realize that Canada does not allow anything to go to anywhere.  I have prepared an alphabetical guide to some the relevant Canadian export controls and economic sanctions issues in highlight Canada has many restrictions on exports.  Since this is merely an ABC list in a blog article, there are more issues than what is covered below.

A = Area Control List – Canada’s Area Control List (ACL) is a list of countries in respect of which Canada requires export permits to be obtained for all goods (even for pencils).  Currently, North Korea is on the Area Control List.

B = Belarus – Technically, Belarus is still on Canada’s Area Control List.  However, on May 7, 2016, Global Affairs Canada made an announcement that Canada plans to legally remove Belarus from the Area Control List. Belarus has been on the Area Control List since December 14, 2006.  See the post entitled “Canada Announces Plans To End Strict Export Controls Against Belarus“.

C = Canada Border Services Agency – The CBSA is one of many governmental authorities with a statutory mandate to enforce Canada’s export controls laws.  The CBSA may detain exported goods and seek information about export permits before permitting the export to proceed.  Usually, the CBSA will contact the exporter of record of the export documentation.

D = Dual-Use Goods – Many dual-use goods that may be used for military purposes and civilian purposes may require an export permit in order to be exported. Dual-use goods include include products and technologies associated with a variety of advanced materials, electronics,computers, telecommunications, sensors, lasers, navigation, avionics, marine equipment and technology and propulsion.

E = Export Control List – Canada sets out the restricted goods in the Export Control List.  The Export Control List is a regulation that is passed by the Governor-in-Council  This means that the Export Control List can be changed without tabling a bill in Canada’s Parliament.

F = Firearms, Munitions, Missiles and Military Goods – Most forms of weapons cannot be exported without an export permit.

G = Guide to Canada’s Export Controls – This is an important government publication setting out Canada’s export controls rules and the goods on Canada’s Export Control List.

H = Hazardous Goods and Waste Materials – Canada restricts the export of hazardous goods and waste materials and puts conditions on the export to ensure safe transportation and arrival. Since 1992, Canada has been a party to the international Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. The exporter primarily deals with Environment Canada.

I = Iran – Canada imposes multi-lateral and unilateral economic sanctions against Iran. Canada imposes multi-lateral sanctions pursuant to the United Nations Act and Regulations Implementing the United Nations Resolutions on Iran. Canada imposes unilateral sanctions against Russia pursuant to the Special Economic Measures Act and the Special Economic Measures (Iran) Regulations.  On February 5, 2016, Canada amended its sanctions against Iran to offer some relief – but did not end all sanctions.  Canadian companies must still be cautious and ask questions on proposed activities in and with Iran.

J = Judge – If you do not comply with Canada’s export control and economic sanctions laws, a Canadian judge may impose significant fines and/or prison terms.  Directors and officers of a corporation may also be subject to penalties.  The CBSA may impose AMPS penalties without having to ask a judge.

K = Keep Records – Keep records of your due diligence efforts to determine that you are not selling to a designated person is a country against which Canada imposes economic sanctions.  Keep records of rulings obtained concerning whether goods are on Canada’s Export Control List.  Keep records of the end use certificates that you have obtained.  If you are registered with the Controlled Goods Program, keep all the required records.

L = Legislation – Canada’s export controls and economic sanctions laws are imposed pursuant to many statutes and regulations.  Some of the laws are: Export and Import Permits Act, Special Economic Measures Act, United Nations Act, Criminal Code, Defence Production Act, Freezing of Assets of Corrupt Foreign Public Official Act, etc.

M = Minister Approvals = Canada’s Minister of International Trade and/or the Minister of Foreign Affairs may issue a Ministerial Authorization to permit certain transactions with designated persons (or persons who are not designated persons) in sanctioned countries even if the transaction would otherwise be prohibited.  A Ministerial Approval must be obtained prior to the export and should not be sought in order to correct an infraction.

N = Nuclear Non-Proliferation – Canada imposes export controls and economic sanctions in order to contain and prevent the proliferation of nuclear weapons.

O = Origin – The origin of goods to be exported from Canada may be relevant.  Certain goods of U.S. origin require an export permit prior to export from Canada.  Canada has a bilateral arrangement with the United States that requires Canada to ensure that U.S. controlled goods are not shipped from Canada in order to circumvent U.S. export controls and economic sanctions rules. Some goods require a specific export permit and other goods may be exported pursuant to General Export Permit No. 12.

P = Permits – An exporter of restricted goods must obtain an export permit from Global Affairs Canada (or a Ministerial approval from the minister) prior to exporting the restricted goods.

Q = Quotas – Certain goods, such as softwood lumber are subject to export quotas.

R = Russia – Canada imposes unilateral sanctions against Russia pursuant to the Special Economic Measures Act and the Special Economic Measures (Russia) Regulations.

S = Sanctions – Canada imposes multi-lateral and unilateral economic sanctions against a number of countries. Canada imposes multi-lateral economic sanctions pursuant to the United Nations Act and regulations thereto.  Canada imposes unilateral sanctions pursuant to the Special Economic Measures Act and regulations thereto.

T = Trade Controls Bureau – The Trade Controls Bureau (TID) of Global Affairs Canada administers Canada’s export controls and economic sanctions laws.

U = Unilateral Sanctions – Canada may choose to impose unilateral sanctions against a country in order to send a message that Canada does not agree with that country’s activities.  Unilateral sanctions may be imposed in addition to or to supplement sanctions imposed by the United Nations Security Council.

V = Vigilance = Exporters must exercise vigilance to ensure that they are in compliance with Canada’s export controls laws (and the laws of other countries and some laws have extra-territorial application).  The first step is to establish internal policies and controls.

W = Wassenaar Convention – Canada is a signatory to the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (the Wassenaar Arrangement). The Wassenaar Arrangement is a voluntary multilateral export control regime established by 41 countries with a view to regional and international security and stability, transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies. The List of Dual Use Goods and Technologies is updated from time to time (usually based on Plenary Meetings).

X = X-Ray – The Canada Border Services Agency will X-ray your luggage before you leave Canada and x-rays packages couriered/mailed/shipped from Canada.  If a CBSA officer sees or has reason to believe controlled or restricted or prohibited goods are to be exported, he/she will detain the goods for further review.

Y = Yellow – Anyone engaged in export activities or dual use goods or U.S. Origin goods must exercise caution.

Z = Zimbabwe – Zimbabwe and many others countries are the subject of regulations pursuant to the Special Economic Measures Act and the United Nations Act.

Does the Brexit Decision Affect the Canada-EU CETA?

Posted in Trade Agreeements

chessOn June 23, 2016, Britain voted to leave the European Union.  Does the Brexit decision affect the Canada-EU Comprensive Economic and Trade Agreement (CETA)? The answer is most likely and sadly “Yes”.

In October 2013, Prime Minister Harper and José Manuel Barroso announced an agreement in principle. In August 2014, Canada and the EU announces that they had completed the text of the CETA, marking the conclusion of negotiations. In October 2014, Canada and the EU released the completed text of the CETA at the Canad-EU Summit in Ottawa. On February 29, 2016, Canada’s Minister of International Trade, Chrystia Freeland, and the European Union’s Commissioner for Trade Cecilia Malmström announced the completion of the legal review of Canada-EU CETA.  The Final Text was released.

However, the Canada has not tabled implementing legislation in Canada’s Parliament. As a result, Canada has not taken steps to ratify the CETA.  The same holds true across the pond. The EU Members States must each ratify the CETA under domestic laws (not an EU law) and none have done so yet.

The good news for Canada is that each EU Member State signed the CETA separately to commit to the negotiated agreement and EU Member States signed separate side letters.  However, the fact that each EU Member State participated in the long negotiation process and signed individually (rather than as a single entity) does not mean that there is everything will remain on track.  There is hope that all EU Member States will see the benefits of CETA and continue the ratification process – we have come so far.

That being said, Canadian businesses need to be realistic. The Brexit decision will most likely put Britain’s exit from the EU (and potential other referendum campaigns) as a higher priority for the EU Member State governments than the CETA.

In addition, and importantly, Britain was one of Canada’s best allies in the Canada-EU CETA negotiations.  If Britain is not longer pushing the CETA agenda, it may be that the changes within the European trading relationship will be the priority for years to come and CETA will never be ratified.

Chapter 34 of the CETA (Article X.09) addresses the accession of a new member to the EU.  It does not address the exit of a country from the EU.  The negotiators did not  cover off that scenario because no one thought it would ever happen.  Oooooppps.

Chapter 34 of the CETA (Article X.06) sets out the entry into force provisions. The CETA will enter into force on the first day of the second month following the date on which the Parties have notified each other that the procedures to ratify in domestic law of each signatory have been completed.  The problem is that if ratification does not occur in each of the Parties, the second month will never come.  It is drafted as an all-or-none proposition.

However, there is a glimmer of hope.  Pursuant to Article X.o2 of CETA, the EU Member States and Canada may agree, in writing, to amend the CETA. Any amendment shall enter into force after the Parties exchange written notifications certifying that they have completed their respective applicable internal requirements and procedures, on such date as the Parties may agree.  It may be possible for the EU Member States, Britain and Canada to agree to amend the coming into force Article X.06 provisions to allow for the CETA to have effect on a country by country basis.  Article X.06 of CETA specifically allows the Parties may by mutual agreement fix another date for coming into force. This is not an ideal scenario, but it is better than throwing the CETA tet in the recycle bin.

Does The Brexit Decision Affect Canada’s Export Control and Economic Sanctions Laws?

Posted in Canada's Federal Government, Export Controls & Economic Sanctions

iStock_000015731499XSmallOn June 23, 2016, Britain voted to leave the European Union.  Does the Brexit decision affect Canada’s export controls and economic sanctions regimes?

The short answer is, “No, not specifically”.  It is not likely that Brexit will have a direct impact on Canada’s export controls and economic sanctions regimes.  This is because Canada’s economic sanctions laws do not refer to the “European Union” mainly because the European Union is not a party to the Wassenaar Arrangement.  All member states of the European Union (other than Cyprus) are individual members of the Wassenaar Arrangement.  So, following the Wassenaar Agreement and looking at individual country risks, Canada identifies specific countries rather than trading blocks.

In particular, some regulations made pursuant to the Export and Import Permits Act refer to the United Kingdom specifically and do not refer collectively to the European Union. For example, the following regulations and orders refer to the United Kingdom:

  • Automatic Firearms Country Control List;
  • the Export Control List;
  • General Export Permit No. Ex.1 “Export of Goods for Special and Personal Use Permit“;
  • General Export Permit No. 41 “Dual-Use Goods and Technology to Certain Designations“;
  • General Export Permit No. 43 “Nuclear Goods and Technology to Certain Destinations“;
  • General Export Permit No. 44 “Dual-Use Nuclear Goods and Technology to Certain Destinations“;
  • General Export Permit No. 45 “Cryptography for the Development or Production of a Product“;
  • General Export Permit No. 46 “Cryptography for Use by Certain Consignees“; and
  • General Export Permit No. 100 “Eligible Agricultural Goods“.

As a result of the specific reference to the “United Kingdom”, regulatory amendments are not required to respond to the June 23, 2016 Brexit vote decision. That being said, in the future, if Scotland or Ireland hold referendums to exit the United Kingdom, changes will be necessary. It is likely that Britain will be a listed destination/country. Whether Scotland and Ireland would be listed after separation from the United Kingdom will likely be considered in light of the fact that Britain’s influence will be absent on a going forward basis after any such separation vote.

Canada does not impose economic sanctioned against any European Union member pursuant to the United Nations Act or the Special Economic Measures Act. As a result, there is not economic sanctions consideration at this time.

However, an indirect effect may be felt in the future.  The United Kingdom has been an ally of Canada in recent years in advocating for economic sanctions and trade restrictions.  In the future, Canada may have to resort to unilateral economic sanctions pursuant to the Special Economic Measures Act where the European Union countries do not support multilateral economic sanctions so that United Nations does not pass Security Council resolutions against problem countries in the World.

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

Do Any Canadian Laws Need To Be Changed As A Result Of The Brexit Decision?

Posted in Canada's Federal Government

3d human with a red question mark

On June 23, 2016, Britain voted to leave the European Union.  On June 24, 2016, the World woke up to change on the horizon.  Sometime inn the next two years, countries with legislation or regulations specifically naming the “European Union” will need to amend the legislation to refer to Britain separately from the European Union.  This got me thinking about which Canadian laws will need to be changed.  There are a few.

The obvious first place to look is tax legislation and income tax treaties.  Good news, Canada does not have a tax treaty with the European Union.  There is the Convention between the Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland, the Canada-United Kingdom Protocol (2003) and the Canada-United Kingdom Protocol (2014).  So, changes will not be required to these agreements unless Scotland or Ireland hold referendums to leave the United Kingdom.

Subsection 261(1) of the Income Tax Act refers to “the currency of the European Monetary Union” as a “qualifying currency”.  This will not need to be changed because the Great Britain Pound was never abandoned for the Euro.

Paragraph 8(d) of the Bank of Canada Act states that “[t]he Bank may … buy and sell securities issued or guaranteed by the Government of the United States of America or Japan or the government of a country in the European Union…“.  This law will need to be amended.  Changes to a statute must be tabled in the Canadian Parliament.

The Schedule to the Export and Import of Rough Diamonds Act refers to the “European Union”.  Section 2 of the Export and Import of Rough Diamonds Act provides that the Minister may, by order, amend the schedule by adding the name of a state, international organization of states or dependent territory of a state, or a customs territory, that participates in the Kimberley Process or by deleting the name of an entity that ceases to participate in that Process.

Subsection 10(1) of the Protection of Passenger Information Regulations refers to the European Union and decision adopted by the European Commission pursuant to Article 25(6) of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995.  As a result, this regulation will need to be amended.  Since we are talking about a regulation, the Governor-in-Council may make the necessary amendments at the right time without tabling legislation in the Canadian Parliament.

Section 2 of the Designation of Countries (Standards Council of Canada) Order designates “any country that is a members state of the European Union” or the purposes of paragraph 4(2)(d) of the Standards Council of Canada Act.  As a result, this Order in Council will need to be amended. Since we are talking about an Order, the Governor-in-Council may make the necessary amendments at the right time without tabling legislation in the Canadian Parliament.

The definition of “domestic requirements” in section 1 of the Protection for the Income of Milk Producers Regulations (1996) refers to the “European Union”.  As a result, this regulation will need to be amended.  Since we are talking about a regulation, the Governor-in-Council may make the necessary amendments at the right time without tabling legislation in the Canadian Parliament.

Schedule IV of the Coastal Fisheries Protection Regulations refers to the “European Union”.  Schedule IV identifies countries whose flag flown by a vessel is subject to section 5.2 of the Coastal Fisheries Protection Regulations.  As a result, this regulation will need to be amended.  Since we are talking about a regulation, the Governor-in-Council may make the necessary amendments at the right time without tabling legislation in the Canadian Parliament.

In addition, it may be necessary to change the World Trade Agreement Implementation Act when changes are made to the WTO.

Based on the foregoing list of required amendments, it may be concluded that the June 23, 2016 Brexit decision will not have Canadian bureaucrats working long hours changing legislation.  A few changes are required – but nothing extraordinary.

Canada Quietly Repeals Schedule Of Politically Exposed Persons From Egypt

Posted in Canada's Federal Government, Export Controls & Economic Sanctions, Exports

chessOn March 10, 2016, Canada quietly amended the Regulations Amending the Freezing Assets of Corrupt Foreign Officials (Tunisia and Egypt) Regulations and repealed provisions concerning Egypt.  Schedule 2 designating “politically exposed persons” in Egypt has been repealed. This means that the provisions of the Freezing of Assets of Corrupt Foreign Officials Act no longer apply to any Egyptian official.

This means that Canada does not have any restrictions on doing business with Egypt or Egyptian officials other than the usual export controls and trade restrictions applicable to most other countries/officials. Canadian businesses may engage in business with and deal with property of persons who were formerly designated as “politically exposed persons” on the Egyptian list.  Further, reporting obligations end and Canadian businesses not longer must report property in one’s possession of Egyptian “politically exposed persons.”  This means that the ongoing reporting obligation on financial institutions also ends.

The Freezing Assets of Corrupt Foreign Officials Act authorizes the Governor-in-Council (that is, Canadian Cabinet) to make orders directing that the property (whether real or personal), situated in Canada, of a “politically exposed foreign person” be seized, frozen or sequestered. The Freezing Assets of Corrupt Foreign Officials Act also authorizes the Governor-in-Council to make orders restricting the dealings that any person in Canada or any Canadian anywhere in the world may have with such a “politically exposed foreign person.”

 

Canada Introduces More Preclearance Legislation For People and Goods

Posted in Border Security, Canada's Federal Government, Cross-border trade, Customs Law, Exports, U.S. Federal Government

Canada-US GlobeOn June 17, 2016, the Minister of Public Safety and Emergency Preparedness introduced Bill C-23 “an Act respecting the preclearance of persons and goods in Canada and the United States” (to be known as the Preclearance Act 2016“) in the House of Commons.  This proposed legislation does not impose obligations in the United States and is not contrary to the sovereignty of the United States despite the name of the bill. The Government of Canada issued a limited information News Release and a Backgrounder.

Bill C-23 is intended to implement the Agreement on Land, Rail, Marine, and Air Transport Preclearance between the Government of Canada and the Government of the United States of America signed on March 16, 2015 (the “Agreement”). A treaty, such as the Agreement, is not enforceable in Canadian law until implementing legislation is passed. Bill C-23 is the implementing legislation for the Agreement.

This Agreement is a component of the Beyond the Border Action Plan that was announced in February 2011. The Agreement was previously tabled in the House of Commons on April 22, 2015 by the Harper Government. So, this is not a new initiative and it should pass Canada’s legislative process.

The main purpose of the Agreement and Bill C-23 is to facilitate and expedite travel between Canada and the United States for goods and services.  Canada and the United States have one of the most important trading relationships in the World.  As a result, mechanisms such as preclearance, make a lot of common sense.

Part 1 of Bill C-23 addresses the performance of U.S. preclearance officers in Canada. Part 1 of Bill C-23 authorizes United States customs officers to conduct preclearance in Canada of travellers and goods bound for the United States. Bill C-23 also authorizes a federal Minister to designate preclearance areas and preclearance perimeters in Canada, in which preclearance may take place. Bill C-23 gives United States preclearance officers with powers to facilitate preclearance.

The exercise of any power and performance of any duty or function by a United States preclearance officer is subject to Canadian law, including the Canadian Charter of Rights and Freedoms, the Canadian Bill of Rights and the Canadian Human Rights Act. Canadian police officers and the officers of the Canada Border Services Agency are authorized to assist United States preclearance officers in the exercise of their powers and performance of their duties and functions.  Bill C-23 allows a traveller bound for the United States to withdraw from the preclearance process, unless the traveller is detained under Part 1.  Bill C-23 limits the ability to request the extradition or provisional arrest of a current or former United States preclearance officer.

Part 2 of Bill C-23 addresses the performance of Canadian preclearance officers in the United States. Bill C-23 specifies how the Immigration and Refugee Protection Act will apply to travellers bound for Canada who are in preclearance areas and preclearance perimeters in the United States, and extends the application of other Canadian legislation that relates to the entry of persons and importation of goods into Canada to those preclearance areas and preclearance perimeters. Bill C-23 allows a traveller bound for Canada to withdraw from the preclearance process, unless the traveller is detained.

Part 3 of Bill C-23 contains amendments to the Criminal Code.

Part 4 of Bill C-23 amends the Customs Act.

Preclearance allows the inspection of goods and people before they leave the country of exit. A preclearance inspection at a point of embarkment is essentially the same inspection an individual would undergo at a U.S. port of entry (or at a point of disembarkment) and preclearance travellers do not have to undergo a second U.S. Customs and Border Protection inspection upon arrival in the United States.  Preclearance of goods occurs away from the border prior to the export from Canada and is the also the same inspection goods would undergo at a U.S. port of entry and precleared goods do not have to undergo a second U.S. Customs and Border Protection inspection upon arrival in the United States. 

Many travellers from Canada are familiar with preclearance at airports, such as Toronto Pearson International Airport, Calgary Airport, Montreal Trudeau Airport, Vancouver Airport, etc. At previously approved preclearance airports, all travelers go through U.S. Customs Preclearance before boarding flights destined for a location in the U.S.  Inadmissible travelers are not permitted to board their planes and do not enter the United States.  High risk passengers are screened before being allowed to proceed.  Goods are also x-rayed to identify risks.

This preclearance will be expanded to other airports and land/rail/marine locations.  For example, preclearance will be available at a number of new Canadian locations, including Quebec’s Jean Lesage International Airport, Toronto’s Billy Bishop City Airport, Montreal Central Station and the Rocky Mountaineer.

Preclearance is good for Canada and Canadian businesses.  Previously, Canada and the United States have worked at establishing a security perimeter around North America (or, at least, Canada and the United States).  The next step is to somewhat erase the border between Canada and the United States for the movement of goods and people – it can never be fully erased. The next step in the process will be to further harmonize laws and regulations and policies to eliminate (or reduce) bottlenecks at the border in order to expedite the movement of low risk goods and people.  But, I digress beyond Bill C-23 to paint the picture on where we need to go from here.

For more information about Bill C-23, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com. Alternatively, visit www.lexsage.com.

Canada To Add Export Smuggling Offence into Customs Act

Posted in Border Security, Canada's Federal Government, Controlled Goods Program, Customs Law, Export Controls & Economic Sanctions, Exports, Legal Developments

Gavel and Scales of JusticeOn June 15, 2016, the Government of Canada introduced Bill C-21 “An Act to amend the Customs Act” in the House of Commons. The amendments to the Customs Act focus on exports of people and goods.  Many of the amendments deal with the gathering of information about the export of goods and people.  However, one of the hidden changes relating to export smuggling may be more important for businesses.

New subsection 159(2) of the Customs Act creates a new offence of smuggling out of Canada.  Subsection 159(2) provides:

“Every person commits an offence who smuggles or attempts to smuggle out of Canada, whether clandestinely or not, any goods that are subject to duties, or any goods the exportation of which is prohibited, controlled or regulated under this or any other Act of Parliament.”

This provision must be read in conjunction with many other statutes, such as the Export and Import Permits Act, the Special Economic Measures Act, the United Nations Act, etc.

Section 160 of the Customs Act is amended to extend the punishment to export smugglers.  If a person commits an offence under new Subsection 159 (2) of the Customs Act, the person may, upon summary conviction, be fined up to $50,000 and/or face up to six (6) months in prison. Upon indictment, the person may be be fined up to $50o,000 and/or face up to five (5) years in prison.

The Canada Border Services Agency and the Royal Canadian Mounted Police will enforce the new export smuggling provision in the Customs Act.

The new smuggling offence will not be in effect until Bill C-21 completes the legislative process.  The date that the amendments to the Customs Act will come into effect will be established by Cabinet.

Canadian businesses should be mindful of this new export smuggling offence because it layers the punishment for exporting controlled or prohibited goods without proper paperwork.  Canadian business persons are the most likely to run into difficulty by traveling with the controlled or prohibited goods in their luggage.  This would include traveling with samples that are on the Export Control List.

Based on our experience, the CBSA x-rays luggage leaving Canada.  In addition, the Canadian Air Transportation Security Authority (CATSA) x-rays luggage that travelers take with them.  If CATSA sees large sums of cash in a person’s carry on luggage, they report the cash to the CBSA and the person is removed from the flight.  The same can hold true for goods within a person’s luggage.  This means that if a traveler does not have the proper paperwork relating to the permissibility of an export of goods (e.g., an export permit or Ministerial Authorization), it could delay travel of the person or the goods.  As a result, it will be more important to ask questions about Canada’s export controls laws.

 

What Businesses Should Know About Bill C-21 Amendments to Customs Act (Canada)

Posted in Border Security, Canada's Federal Government, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Exports, Harmonization, Immigration law, Legal Developments, U.S. Federal Government

Canada CustomsOn June 15, 2016, Canada’s Minister of Public Safety and Emergency Preparedness introduced Bill C-21 “an Act to amend the Customs Act” in the Canadian House of Commons. It is a relatively short bill containing important and far-reaching amendments to the Customs Act.  Many people think that the Customs Act only affects them if they import goods into Canada – this is not the case and the amendments in Bill C-21 have nothing to do with the collection of customs duties on imported goods.

As a result, Bill C-21 could affect any Canadian business that operates internationally, even if it does not import goods.  If businesspersons travel outside Canada on business, the amendments could affect them.  If the business exports goods, the amendments could have an impact.

This post sets out ten things that Canadian businesses should know about Bill C-21. We are not going to address the privacy law issues that will be covered extensively by other.

1. Bill C-21 will pass the legislative process in Canada. There is a majority Federal Government and it is unlikely that the draft presented at first reading will be amended further.  There are few statements made by the Minister of Public Safety and Emergency Preparedness on June 15, 2016 at the time of the introduction of Bill C-21.  It should be expected that Bill C-21 will become law.  As a result, knowing new obligations and the potential effects of the legislation is important.

2. Bill C-21 is required as part of the Beyond the Border initiative announced by Prime Minister Harper and President Obama in February 2011. On March 10, 2016, Prime Minister Trudeau and President Barack Obama announced that Canada and the United States will fully implement a system to exchange basic biographic entry/exit information at the land border and build off the process already in place. Bill C-21 fulfills Canada’s side of that agreement.

3. The main purpose of Bill C-21 is to introduce the legislative requirements to collect biometric data on all persons as they exit Canada.  This enables a process of matching entry and exit information. New Section 92 is added to the Customs Act to replace old section 92, which was repealed in 1995. New subsection 92(1) of the Customs Act provides:

“In relation to any person who is leaving Canada or who has left Canada, the [CBSA] may collect, from a prescribed source, in the prescribed circumstances, within the prescribed time and in the prescribed manner, the following information:
(a) the surname, first name and middle names, the date of birth, the citizenship or nationality and the sex of the person;
(b) the type of travel document that identifies the person, the name of the country or organization that issued the travel document and the travel document number; and
(c) the date, time and place of the person’s departure from Canada and, if the person arrives in the United States, the date, time and place of their arrival.”

The Government of Canada will be permitted by new subsection 92(2) of the Customs Act to pass regulations that would (a) prescribing the sources from which the information may be collected; (b) respecting the circumstances in which the information may be collected; and (c) respecting the time within which and the manner in which the information may be collected.  Since regulations do not need to be debated in the House of Commons and may be passed by the Governor-in-Council, most of the details will be in regulations.  it will be important to continue to monitor in the Canada Gazette regulations made pursuant to the Customs Act in order to be fully informed of the new requirements.  Further, many laws and regulations are supported by policy.  CBSA policy statements may also evolve the new exit data requirements.

4. Business persons who travel regularly for business and spend a lot of time outside Canada may be caught in other legal regimes that limit benefits to residents of Canada.  A person’s access to the Canadian health care system and other benefits could be collaterally affected. Minster of Public Safety and Emergency Preparedness stated to reporters that “Bill C-21 … will help [Canada’s Immigration Minister]  deal with immigration proceedings and visa applications and it will help us ensure the integrity of Canadian social programs.”  The “number of days in Canada” limitation in many laws, regulations and guidelines at the federal and provincial levels may become important.  Businesses will need to become familiar with such limitations and business persons will need to track their travel days to ensure compliance with other Canadian laws.

5. Businesspersons who travel to Canada on a regular basis also will need to carefully monitor their number of days in Canada. Individuals may be required to pay Canadian income tax if they are in Canada for more than the legislated period of time.  Since the CBSA will have both entry and exit data, the Government of Canada will be able to calculate number of days in Canada on an annual basis.  Tax assessment notices (including CPP and EI) may be in the mail if care is not taken.

6. More Obligations of Conveyances: If your business involves conveyances, new reporting obligations may be imposed by the amendments to the Customs Act.  New subsection 93(1) of the Customs Act imposes obligations on a “prescribed conveyance” that departs from a place in Canada and has a final destination outside Canada to provide information about passengers and the place of departure (it is not clear whether that will be a place of embarking or the port of exit).  New subsection 93(2) of the Customs Act authorizes the Minister of Public Safety and Emergency Preparedness to issue a notification to any person who is required to give information under subsection (1) to require the person to take any specified measure with respect to the information.  New subsection 93(1) of the Customs Act imposes an obligation to comply with ministerial requests to give information.

7. New section 94 of Customs Act creates an obligation on persons leaving Canada to answer questions of a CBSA officer.  Section 94 of the Customs Act provides that:

“Every person who is leaving Canada shall, if requested to do so by an officer, present themselves to an officer and answer truthfully any questions asked by an officer in the performance of their duties under this or any other Act of Parliament.”

While providing truthful answers is something we can all accept, the fact of the matter is that the CBSA will be able take the position that a person has provided false answers and pursue the individual for committing an offence under the Customs Act.  CBSA officers routinely take the position that persons have provided false answers when mistakes are made (e.g. when a person says they have less than $10,000 and the converted amount exceeds $10,000).  This provision could become important in connection with the new export smuggling provision discussed briefly below.  If a person says that are not exporting restricted goods and it turns out they are incorrect, the individual may be pursued for providing false information – remember, ignorance of the law is not excuse.

8. Section 95 of the Customs Act currently imposes obligations to report certain exports of goods. Subsection 95(1) will be amended to clarify the obligations.  Subject to exceptions, all goods that are exported shall be reported at any time and place and in any manner that may be prescribed.  We have previously written about export reporting obligations.

9. The CBSA has expanded detention powers.  Subsection 97.25(1) of the Customs Act is amended to permit the CBSA to detain any goods that are to be exported, that have been reported under section 95.  A detention power allows the CBSA to stop goods that are being exported and keep the goods from being exported.  There are legal mechanisms to provide evidence to the CBSA so that goods are not detained indefinitely.

10. A new export smuggling offence is added to section 159 of the Customs Act.  A blog post about the new export smuggling offence will be posted on this blog on June 21, 2016.

For more information about Bill C-21, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.

How To File A Customs Origin Appeal In Canada

Posted in Customs Law, origin, Trade Remedies

chessIf the Canada Border Services Agency (“CBSA”) has made an error during an origin verification, the importer may file a request for re-determination to appeal the assessment of duties. In most cases, the CBSA changes the origin from country with which Canada has a free trade agreement (e.g., the United States) to a country with which Canada does not have a free trade agreement (e.g., China) and issues a detailed adjustment statement charging the additional duties and interest resulting from the change in duty rate.

What is an customs origin verification? A customs origin verification is when the CBSA conducts an audit of an importer to verify that the importer reported the correct origin of the goods on the B3 Customs Coding Form.  When the importer imports goods into Canada, it communicates to the CBSA the origin of the goods and pays the applicable duties and taxes (e.g., goods and services tax, provincial sales tax, excise tax, etc.) based on the applicable duty rate for that country.  For example, most goods from the United States are duty free under NAFTA and the UST rate of duty is applied.  If the goods are actually from China, the Most-Favoured-Nation (“MFN”) rate of duty would apply.

In rare circumstances, the goods at issue are subject to anti-dumping and/or countervailing duties.  If the origin of the goods changes to a Subject Country, antidumping/countervailing duties may be applied in addition to the customs duties.  For example, if aluminum extrusions exported from the United States are determined by the CBSA to have originated in China, the CBSA may apply antidumping and countervailing duties.

If you believe the assessment is incorrect and/or the CBSA misunderstood the facts or ignored relevant facts, you may file a request for re-determination (an appeal).  You must file the request for re-determination within 90 days of the date on the detailed adjustment statement.  Do not miss this deadline.

You file the request for re-determination by completing a B2 “Adjustment Request”.  If there is more than one detailed adjustment statement, you will have to complete more than one form. The B2 form must match with the original B3 “Customs Coding Form”. The CBSA has one year to review the request for determination and make a decision.

Make sure that you provide reasons for the request for re-determination.  If there isn’t enough room in the B2 “Adjustment Request” form, file an attached schedule.  If you would like to resolve the issues more quickly, put your best arguments forward in a clear and concise manner.  Let the appeals officer understand your point of view and evidence in support of your position.  A common mistake that we see is that the importer has a customs broker file the B2 “Adjustment Request” form without providing clear information for the CBSA to consider.  A mere “you are wrong” is not sufficient to prove your case.

You must pay the amount of duties and interest owing as stated on the detailed adjustment statement or the CBSA may detain future imports of goods – they have ways to make you pay. in the case of anti-dumping and countervailing duties, payment of the duties and taxes owning perfects the appeal.  If the money is not paid, the appeal will be rejected by the CBSA.

If the CBSA does not change their minds about the origin, you may file an appeal with the Canadian International Trade Tribunal (“CITT”) within 90 days of the adverse decision of the CBSA. Do not miss this deadline. The initial appeal to the CITT is relatively simple. You should provide the CITT with sufficient information to identify (1) the appellant, (2) the applicable statutory provisions (e.g., is this aCustoms Act or Special Import Measures Act appeal), (3) the date of the CBSA decision being appealed, (4) the detailed adjustment statements at issue and (5) a brief indication of the issues to be decided. This can be done in a letter to the Registrar of the CITT. The notice of appeal or appeal letter must state the appellant’s intentions and be accompanied by a copy of the assessment, reassessment, rejection, decision, determination or re-determination, as the case may be, from which the appeal is launched.

Within 60 days of the filing and acceptance of the appeal, you must file an Appellant’s Brief.  This document must set out all the relevant facts, the law, and arguments.  You must file your supporting evidence that the CITT is to consider.  The Appellant’s Brief takes planning (as you may need expert evidence or test reports).  This document takes time to prepare – good arguments are drafted and redrafted.  Based on our experience, if the Appellant’s Brief can show the Department of Justice lawyer the weaknesses in their case, they may settle prior to having to file the Respondent’s Brief.

You should know the case you wish to present as early as the request for re-determination.  You should have your evidence plan in the works at this stage.  If you wait until the CITT hearing, you may find that the CITT does not accept your evidence.  If you do not make certain arguments in the Appellant’s Brief, you may be precluded from arguing certain points later (e.g. in argument at the hearing).

So, plan your litigation strategy as early as possible and stay organized from the point of the initial verification by the CBSA.  Seek help in preparing written representations and the available arguments.

If you have any questions, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com. Alternatively, visit www.lexsage.com.

How Much Dairy Does General Import Permit #1 Allow?

Posted in Agriculture, Canada's Federal Government, Customs Law, Imports Restrictions, NEXUS

CheeseMany Canadians cross border shop but do not realize that not all groceries can be imported into Canada.  Most dairy products are subject to import restrictions.  Many businesses who import dairy products (and eggs and poultry) know about the import restrictions.  The average Canadian does not. Some individuals who cross border shop buy too much in terms of dairy products and their purchases are seized at the border. In addition, individuals have their NEXUS passes cancelled becasue they did not know the rules.

Canadians may import dairy products for personal consumption using General Export Permit No: 1  “Dairy Products For Personal Use” (GEP No. 1).  GEP No. 1 permits the importation of $CDN 20 worth of dairy products listed in the schedule to GEP No. 1.  If more than one person is in the car, the value can be multiplied by the number of people in the car.  Technically, you will run into a problem if anyone in the car is lactose intolerant as they cannot consume the dairy products – meaning someone else is over their limit.

The dairy products listed in Schedule 2 to GEP No. 1 are:

 

  • Milk and cream, neither concentrated nor containing added sugar or other sweetening matter, of a fat content, by weight, not exceeding 6 per cent;

  • Cream, neither concentrated nor containing added sugar or other sweetening matter, of a fat content, by weight, exceeding 6 per cent;

  • Milk and cream, containing added sugar or other sweetening matter, in powder, granules or other solid forms, of a fat content, by weight, not exceeding 1.5 per cent;

  • Milk and cream, in powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5 per cent, not containing added sugar or other sweetening matter;

  • Milk and cream, in powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5 per cent, containing added sugar or other sweetening matter;

  • Preparations (other than preparations classified under tariff item No. 2106.90.31 or 2106.90.32 in the List of Tariff Provisions set out in the schedule to the Customs Tariff) containing more than 15 per cent by weight of milk fat, but less than 50 per cent by weight of dairy content, and suitable for use as butter substitutes, not elsewhere specified or included, that are classified under tariff item No. 2106.90.33 in the List of Tariff Provisions set out in the schedule to the Customs Tariff.

  • Milk and cream, not in powder, granules or other solid forms, concentrated (whether or not containing added sugar or other sweetening matter) or not concentrated (containing added sugar or other sweetening matter);

  • Powdered buttermilk, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa;

  • Buttermilk (other than powdered buttermilk), curdled milk and cream, kephir and other fermented or acidified milk and cream, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa;

  • Products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included;

  • Powdered whey, whether or not containing added sugar or other sweetening matter;

  • Milk protein substances with a milk protein content of 85% or more by weight, calculated on a dry matter basis;

  • Mixes and doughs, for the preparation of bread, pastry, cakes, biscuits and other bakers’ wares containing more than 25 per cent by weight of butterfat and not put up for retail sale;

  • Milk, cream or butter substitutes containing 50 per cent or more by weight of dairy content;

  • Food preparations of goods of heading Nos. 04.01 to 04.04 in the List of Tariff Provisions set out in the schedule to the Customs Tariff (other than ice cream mixes or ice milk mixes), containing more than 10 per cent but less than 50 per cent on a dry weight basis of milk solids, not in retail packaging;

  • Food preparations of goods of heading Nos. 04.01 to 04.04 in the List of Tariff Provisions set out in the schedule to the Customs Tariff (other than ice cream mixes or ice milk mixes), containing 50 per cent or more on a dry weight basis of milk solids, not in retail packaging;

  • Food preparations, not elsewhere specified or included, containing 50 per cent or more by weight of dairy content;

  • Non-alcoholic beverages containing milk (other than chocolate milk) and containing 50 per cent or more by weight of dairy content and not put up for retail sale;

  • Complete feeds and feed supplements, including concentrates, containing 50 per cent or more by weight, in the dry state, of non-fat milk solids (other than preparations classified under tariff item No. 2309.10.00, 2309.90.10 or 2309.90.20 in the List of Tariff Provisions set out in the schedule to the Customs Tariff), not elsewhere specified or included;

  • Chocolate ice cream mix and ice milk mix;

  • Ice cream mixes and ice milk mixes containing more than 10 per cent but less than 50 per cent on a dry weight basis of milk solids;

  • Ice cream mixes and ice milk mixes containing 50 per cent or more on a dry weight basis of milk solids;

  • Ice cream and other edible ice, whether or not containing cocoa, other than flavoured ice and ice sherbets;

  • Fresh (unripened or uncured) cheese, including whey cheese and curd;

  • Cheddar cheese and Cheddar types of cheese, grated or powdered;

  • Grated or powdered cheese of all kinds, other than Cheddar and Cheddar types;

  • Processed cheese, not grated or powdered;

  • Blue-veined cheese;

  • Cheddar cheese and Cheddar types of cheese;

  • Camembert cheese and Camembert types of cheese;

  • Brie cheese and Brie types of cheese;

  • Gouda cheese and Gouda types of cheese;

  • Provolone cheese and Provolone types of cheese;

  • Mozzarella cheese and Mozzarella types of cheese;

  • Swiss/Emmental cheese and Swiss/Emmental types of cheese;

  • Gruyère cheese and Gruyère types of cheese;

  • Havarti cheese and Havarti types of cheese;

  • Parmesan cheese and Parmesan types of cheese;

  • Romano cheese and Romano types of cheese;

  • All other cheeses;

  • Yogurt, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa;

  • Butter;

  • Dairy spreads; and

  • Fats and oils derived from milk.