Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Undervaluation of Goods Can Lead to Criminal Charges And Conviction In Canada

Posted in AMPs, Criminal Law, Cross-border deals, Cross-border trade, Customs Law, Legal Developments, origin, tariff classification, valuation

Customs Building (XL)On August 5, 2016, the Canada Border Services Agency (“CBSA”) posted on the CBSA web-site a News Release entitled “Dartmouth store owner charged for falsifying documents and undervaluing shipments”. This News Release should cause Canadian business owners who import goods and/or general counsel of companies that import goods to ask important questions:

  • “Is my import paperwork accurate, true and complete?”
  • “If I am audited, will the CBSA have any problems with my paperwork?”
  • “When was the last time I looked at my customs documentation to ensure that the import paperwork accurately reflects the value of the goods?”
  • “Do I know what information is being provided to the customs broker in order to properly declare the value and contents of each shipment?”
  • “Who in my import company is providing information to the customs broker and have I adequately supervised that person enough to know correct information is being provided?”

If a business owner/general counsel cannot answer these questions, it is time for an internal compliance review of customs documentation in order to identify under-valuations; failures to add to value for duties, royalties, assists, subsequent proceeds, etc.; overvaluation; errors in tariff classifications; errors in origin statements; descriptions of goods; etc. Most business owners believe that if errors have been made, the CBSA will issue a monetary penalty (e.g., a Detailed Adjustment Statement and AMPs Notice of Penalty) rather than anything more serious.  Think again and read the CBSA News Release below carefully.

The News Release stated:

“Canada Border Services Agency (CBSA) announced today that on July 21, 2016, Kelly Elizabeth Wall, of Bedford, Nova Scotia, pled guilty in Dartmouth Provincial Court to two charges under the Customs Act. One charge was under section 12(1) for non-report and one under section 153(a) for making false statements.

A CBSA investigation determined that between May 2008 and July 2014, Kelly Wall undervalued 32 commercial shipments to her store “Encore Décor Ltd” in Dartmouth which imported and sold household accessories such as bedding and curtains. Wall used fictitious invoices to account for less cargo than was imported and undervalued the cargo that was being reported. The total undervaluation was $340,882.73.  It is also alleged that on 16 of the importations Wall forged the CBSA Cargo Control Documents by changing the number of pallets and weight to a lesser quantity to better match the invoices.

Wall was sentenced to a fine of $15,000 on each count ($30,000 in total) and is required to amend 32 commercial accounting documents which will recover approximately $77,000 in evaded duty and taxes.

Quick Facts

  • All commercial goods must be reported to the CBSA whether you transport it yourself or have a carrier transport it for you.
  • All goods entering Canada, regardless of mode, must be reported to the CBSA and may be subject to a more in-depth exam.
  • Failure to declare goods and other Customs Act violations may lead to seizure and/or prosecution in a court of law.

Quotes

“Every importer is required to accurately report all goods being imported into Canada.  The Canada Border Services Agency will continue to prosecute those who purposely evade duties and taxes. ”
– Gina Kennedy, Acting Director, Enforcement and Intelligence Division, Atlantic Region”

This story from a smaller urban center in Nova Scotia was not picked up by many news outlets.  In the Halifax Metro, an article was written entitled “Dartmount store owner fined for falsifying documents and undervaluing shipments”.  The reporter had contacted the CBSA and quoted Blair MacDonald as saying:

  • “I’ve not seen a commercial case where someone is only declaring their shipments on the average of less than 20 per cent”.
  • “We do see people will low ball their shipments. I’ve never seen it to this extent. This is one of the more significant under-valuations that I’ve ever seen and I’ve been doing this for a lot of years.”
  • “When I started comparing manifests she presented to us … if I see eight, it had (actually been) 18; the ones that say nine, it was 19; if it was 21, she deleted the two and changed the number one to a seven.”
  • “This is the first time in my career I’ve ever seen anybody alter, forge, a customs manifest.”

It is important to remember that in the case of Ms. Wall, the CBSA was looking at 32 shipments over a 7 year period of time.  Many businesses can have 32 shipments in one day or in one week or in one month.

The best advice I can give business owners and general counsel is to conduct an internal investigation and look carefully at all the paperwork in a number of transactions.  Hire a lawyer to help you because a lawyer will conduct the review under solicitor-client privilege.  If problems are located, develop plans to make a voluntary disclosure and correct the entries.  You may have to explain to the CBSA how the errors occurred.  But, that could lead to a better result than if you let the CBSA find serious problems during a verification/audit.  Honesty could prevent the commencement of a criminal investigation. Don’t delay in asking a few important questions.

For more information about voluntary disclosures, please go to www.lexsage.com.  We have posted a number of articles about customs matters.  Recent articles that may be helpful are:

What is a No-Names Voluntary Disclosure?

What Every Importer Should Know About Canada’s Customs Duties Reassessment Policy

Canada’s Voluntary Disclosure Policy Has Been Revised

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

Know the Rules: Canada Border Services Agency NEXUS Membership Program Guidelines

Posted in NEXUS

nexussmRecently, the Canada Border Services Agency (CBSA) retired the revised NEXUS Membership Guide (BSF5095) in favour of a NEXUS program page on the CBSA website.

NEXUS card holders should review the rules of the NEXUS program in order to avoid problems at the Canadian border.  The rules are strictly enforced.  If you break any rule, even a small little rule, you will have your NEXUS card confiscated for 7 years and may never be allowed back in the NEXUS program.  As a result, it is important to review this document carefully in order to understand what the CBSA expects of you when you cross the border.

The CBSA enforces the NEXUS rules under a ZERO TOLERANCE policy.  Any infraction, no matter how small, shifts a trusted traveler into the untrustworthy category.

  • If you have commercial goods and you use the NEXUS lane, you are out of the program.
  • If you forget to report any item (even a $1 chocolate bar), you are out of the program.
  • If you get a new passport or driver’s license and do not update your information, you may be out of the program.
  • If you move residences and do not update your address, you may be out of the program.
  • If you fail to answer any question accurately, you are out of the program.

There is no pardon process.  There is no leniency for carelessness or lack of knowledge.

Also, remember that your NEXUS pass expires automatically after 5 years.  Check the date of issue on the back of the card and renew your NEXUS card before it expires.  If you use the NEXUS lane with an expired card, you have broken a rule and may not be renewed for another 5 years.  You may be out of the program.

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

This article was originally published on www.lexsage.com. Republished with permission.

Canada’s Tariff Treatments (as at August 1, 2016)

Posted in Cross-border trade, Customs Law

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

The following table sets out Canada’s tariff rate categories under the Customs Tariff (Canada) and the Canada Border Services Agency reporting codes as at August 1, 2016:

Tariff Treatment Category Abbreviation CBSA Reporting Code
Most-Favoured-Nation (MFN) MFN 2
General Tariff GT 3
Australia Tariff AUT 4
New Zealand Tariff NZT 5
Commonwealth Caribbean Countries Tariff  CCCT 7
Least Developed Countries Tariff LDCT 8
General Preferential Tariff GPT 9
United States Tariff UST 10
Mexico Tariff MT 11
Mexico-United States Tariff MUST 12
Canada-Israel Agreement Tariff CIAT 13
Chile Tariff CT 14
Costa Rica Tariff CRT 21
Iceland Tariff IT 22
Norway Tariff NT 23
Switzerland-Lichtenstein Tariff SLT 24
Peru Tariff PT 25
Colombia Tariff COLT 26
Jordan Tariff JT 27
Panama Tariff PAT 28
Honduras Tariff HNT 29
Korea Tariff KRT 30

 

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

This article was originally published on www.lexsage.com. Republished with permission.

 

Can The CBSA Ask For Your Passwords?

Posted in Cross-border trade, Customs Law, Legal Developments, NEXUS

3d human with a red question mark

The answer is, “Yes”, the Canada Border Services Agency (“CBSA”) can ask for your passwords.  Not only can the CBSA ask for your passwords, the CBSA does ask for passwords.  Not only does the CBSA ask for passwords, the CBSA will unlock your cell phones, mobile phones , smart phones, computers, etc and look at/review your emails, your photographs, your videos, your text messages, etc.  If you do not provide your passwords, you could be arrested and charged and end up with a criminal record. Just ask Mr. Alain Philippon.

News broke today (August 16, 2016) that Mr. Philippon has pleaded guilty (on the eve of trial) to not providing his cell phone password to the Canada Border Services Agency (“CBSA”). Alain Philippon was arrested by the CBSA in March 2015  and charged pursuant to section 153.1 of the Customs Act (Canada) for failing to provide passwords.  Section 153.1 of the Customs Act provides that:

“No person shall, physically or otherwise, do or attempt to do any of the following:
(a) interfere with or molest an officer doing anything that the officer is authorized to do under this Act; or
(b) hinder or prevent an officer from doing anything that the officer is authorized to do under this Act.”

A CBSA officer is authorized under section 99 of the Customs Act to examine goods in a traveler’s possession.  The term “goods” is defined in the Customs Act to include “any document in any form”.  Electronic communications, data and documents would satisfy the definition of “goods”.

According to the Agreed Statement of Facts, Mr. Philippon had $5000 and two PDAs in his possession.  He was sent to secondary examination where swabs of his bags registered a reading for traces of cocaine.  Mr. Philippon refused to provide the passwords to his PDAs.  It is not known whether Mr. Philippon ever did provide those passwords or if he did get his PDAs back from the CBSA.

As a result of the plea deal (to plead guilty and pay a fine of $500), we will never know whether the Nova Scotia Provincial Court has difficulties with the CBSA arresting a person for not providing a password.  This was a smart decision by Philippon who could have been fined up to $25,000 and/or imprisoned for up to one year. The moral of this story is that the CBSA can ask for your passwords and you may end up with a criminal record if you do not provide the passwords.

Customs lawyers have been waiting to learn what a court would say about what first appeared to be an extreme position taken by the CBSA.  Travelers are regularly requested by the CBSA to provide passwords to cell phones, PDAs, computers, etc.  Most travelers comply for fear of the ramifications (also, most travelers have nothing to hide, except embarrassing photos and videos).

Under Canada’s domestic laws, the police do not have an absolute right to ask for passwords.  Individuals in Canada have privacy rights and charter rights.  The rules are very different at the border.

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

This article was originally published on www.lexsage.com. Republished with permission.

10 Tips For Small Business Owners For Keeping Canada Revenue Agency Collections Officers Happy

Posted in GST/HST

iStock_000015731499XSmallRecently, I was contacted by a small business owner who had an unpleasant conversation with a Canada Revenue Agency (“CRA”) collections officer about an outstanding goods and services tax/harmonized sales tax (“GST/HST”) assessment against his small company (of which he was a director).  The CRA collections officer had threatened to send the sheriff to his house that very day to seize personal assets.  When I called the CRA collections officer, she suggested to me that she merely discussed the director’s liability process to the small business owner.  What because clear to me is that the CRA was not clear in what was said because the lack of clarity could result in payments against the outstanding debt.  The CRA collections officer was deliberately attempting to make the small business owner fearful.

However, what was actually happening is that the CRA collection officer had completed a direction to the sheriff to determine the assets of the reassessed corporation.  If the sheriff prepares a “No Assets” report, then the CRA could issue a director’s liability assessment under section 323 of the Excise Tax Act. Only after the CRA issues a director’s liability assessment against the small business owner could the CRA ask the sheriff to seize personal assets.  The problem in this case was that the address provided by the small business owner for the business was his home address.  It was for that reason that the sheriff would come to the home to determine if the corporation has assets that could be seized.

What needed to be done was satisfactorily resolve the corporation’s GST/HST reassessment issues.  The following are tips to keep the CRA collections officer happy and away from personal assets from the small business owner.

1. Do not use your home address as your business address.  If you have an operating business and a business location that is not your home, use that address for communications with the CRA.  If the CRA collections officer issues a direction to the sheriff to prepare an assets report, the sheriff would go to the business address.

2. See if you can enter into a payment arrangement with the CRA to satisfy the corporation’s debt.  The best way to avoid a director’s liability claim is to make sure there are sufficient assets in the corporation.  The payment arrangement usually will be acceptable is it covers 6-24 months (that is you give post-dated cheques to pay the debt over time).

3. If you have a payment arrangement and have provided cheques to the CRA collections officer, you may provide proof of such arrangement to the sheriff.  The sheriff usually takes this into consideration when preparing an assets report.  If the assets report does not state that there are no assets, the CRA may not be able to issue a director’s liability claim (depends on the facts).

4. If you enter into a payment arrangement, ensure there are sufficient funds in the account to pay the cheques.  If a cheque is returned NSF (not sufficient funds), then the CRA collections officer will look at other options to get the money.

5. During the period of the payment arrangement, make sure you are up-to-date on all CRA filings and payments (including GST/HST, income tax, payroll taxes, etc).  CRA collections officers are nervous fellows and gals and they will get concerned if the debts of the corporation start increasing.  This means that the cheques they have no longer cover the outstanding liability and that the outstanding liability will not get paid.

6. While the company is paying off the debt, apply for interest relief.  If the CRA accepts your interest relief request, your outstanding debt will decrease. Every little bit helps.

7. While the company is paying off the debt, if you are able to make a significant payment, do so.  This stops the interest clock on the amount you paid.

8. If you have nothing to hide (and even if you do have something to hide), be honest with the CRA collections officer.  Things you say may cause the CRA collections officer to become concerned.

9. Along the same lines, provide the information that is requested by the CRA collections officer.  If the CRA collections officer trusts you, he/she will be more likely to exercise discretion.

10. Always remember to be civil.  The CRA collectinos officer has a job to do.  It does not become personal unless you make it personal.  Know that they have a supervisor that wants to see results. Help them to their job.

Bonus tip: If you cannot make it work with a CRA collections officer because of a personality conflict between you and her/him, ask to meet with the CRA collections officer and his/her supervisor.  Do not use this opportunity to rant at the supervisor because you will only show the supervisor that the CRA collections officer is right about you.  Take the opportunity to press the reset button of the relationship. You need a positive resolution to your GST/HST problems.

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

Canada’s Economic Sanctions And Admissibility Into Canada: Employees Of Designated Companies May Not Get Into Canada

Posted in Border Security, Export Controls & Economic Sanctions, Immigration law

Gavel and Scales of JusticeAn employee of a designated entity under Canada’s economic sanctions laws may be determined to be inadmissible into Canada and denied entry due to concerns that their employer is subject to sanctions.  In addition, an employee of an entity that is covered by economic sanctions of another country or countries (e.g., the United States, the United Kingdom, Japan, etc.) may be determined to be inadmissible into Canada and denied entry due to concerns that their employer is subject to sanctions.

Such is the curious Federal Court of Canada case of Ramin Fallah v. The Minister of Citizenship and Immigration.  On September 18, 2015, the Federal Court of Canada dismissed an application for judicial review filed by Mr. Ramin Fallah, an employee (Managing Director) of an Iranian company (Fanavari Azmayeshgahi) that was a designated entity under the United Kingdom’s and Japan’s economic sanctions laws, but not listed under the Special Economic Measures (Iran) Regulations (Canada’s economic sanctions regulations in which designated entities are found). Mr. Fallah’s Iranian employer was known to trade in dual-use technologies and the employer was widely believed to be involved with the procurement of goods directly related to Iran’s nuclear program.

Mr. Fallah’s application for a work permit was denied by Citizenship and Immigration Canada on the basis that he was inadmissible as being a danger to the security of Canada.  The Canada Border Services Agency’s inadmissibility assessment stated that Mr. Fallah’s Iranian employer “has been involved with procurement connected to the Iranian nuclear program.”  The CBSA’s inadmissibility assessment further noted that Mr. Fallah’s employer has been identified in open sources and by allied governments as being an entity of Weapons of Mass Destruction concern.

Mr. Fallah contended that the CBSA’s reliance on outside sources gave rise to a breach of procedural fairness. The Federal Court of Canada did not agree.  The Court found that Mr. Fallah was aware that he was denied entry into Canada because of his relationship to his employer.  Mr. Fallah had failed to address the CBSA’s and Citizenship and Immigration Canada’s concerns in his communications relating to admissibility.The Court was o the view that Mr. Fallah was in a position to fully address the CBSA officer’s concerns and he failed to provide evidence to alleviate those concerns.  The Court was of the view that Mr. Fallah was privy to information and failed to provide it to Canada at his peril.  The Court stated that Mr. Fallah “had the opportunity and obligation to provide a full, exculpatory history of his employer’s business practices, yet his response to Officer’s fairness letter was profoundly deficient”.

The Court understood that Mr. Fallah’s employer was not a designated entity under Canada’s unilateral economic sanctions laws.  However, the Court opined that:

“Mr. Fallah complains that the Officer read too much into the listing of his employer in finding that it was “an entity of proliferation concern” in the United Kingdom and Japan. He says that as an importer of medical imaging products capable of being repurposed, it was inevitable that its business would be scrutinized by exporting countries. This, by itself, would not support the Officer’s view that the company was “an entity of proliferation concern”. According to this argument, the fact that Canada did not list Mr. Fallah or his employer under the SEMA regulations was strong evidence that they were not of any concern and that the Officer’s contrary view was perverse.

In my view the Officer’s characterization of the United Kingdom and Japanese export protocols concerning Mr. Fallah’s employer was reasonable. The record discloses that the company was on a watch list in the United Kingdom and Japan so that its importation of dual purpose products could be scrutinized. The record also discloses that the company’s attempts to import products had sometimes been blocked. This was sufficient support for the Officer’s view that the company represented a “proliferation concern”.

It is not an answer to this finding to point out that some importations had been approved. Based on the limited records submitted by Mr. Fallah, those transactions appear not to have involved any technology risks because the imported products were only useful in medical applications. What would have been far more persuasive was evidence showing that Mr. Fallah’s employer was regularly authorized to import dual purpose technologies. The absence of any evidence to that effect is a telling omission.

The fact that neither Mr. Fallah nor his employer were prohibited from exporting Canadian products to Iran under the SEMA regulations says very little about whether they, nevertheless, represented an ongoing security concern. The company appears to have pursued legitimate business interests in the supply of medical equipment of all sorts. There would be no obvious reason for Canada to block those transactions by listing the company or Mr. Fallah.

This decision is important to persons from countries that are subject to Canada’s economic sanctions and the economic sanctions of other countries.  It goes without saying that designated individuals most likely will be considered to be inadmissible to Canada.  However, Canada is also concerned about persons connected to designated entities.  You had better be prepared to provide documents that would alleviate Canada’s concerns if you wish to be granted a work permit to work in Canada. Also, Canada takes nuclear non-proliferation seriously.

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

Death and Customs Duties: The CBSA Issues D-Memo of Bequested Goods

Posted in Customs Law, tariff classification

On November 18, 2015, the Canada Border Services Agency issued D-Memorandum D-2-1-5 “Bequests – Tariff Item No. 9806.00.00”.   In this D-Memorandum, the CBSA sets out the rules applicable when using Customs Tariff Code 9806.00.00 to import goods that have been bequested or are a gift in anticipation on death on a duty-free basis.  Generally speaking, goods are to be classified according to their applicable H.S. Code.  However, if the good is a bequest or a gift in anticipation of death, the importer may use Customs Tariff Code 9806.00.00 and import the good customs duty free and GST/HST free.

The words of Tariff Item No. 9806.00.00 will be strictly construed by the CBSA:

“Personal and household effects of a resident of Canada who has died, on the condition that such goods were owned, possessed and used abroad by that resident;

Personal and household effects received by a resident of Canada as a result of the death, or in anticipation of death of a person who is not a resident of Canada, on condition that such goods were owned, possessed and used abroad by that non-resident;

All the foregoing when bequeathed to a resident of Canada.”

As a result, the relevant criteria are:

  1. The recipient/importer is a resident of Canada; and
  2. The goods have been bequethed or transferred in anticipation of death; and
  3. The goods are personal and household effects
  • (i) owned, possessed and used abroad by a resident of Canada who has died; or
  • (ii) received by a resident of Canada as a result of the death, or in anticipation of death of a person who is not a resident of Canada, on condition that such goods were owned, possessed and used abroad by that non-resident.

Only goods considered as being “personal and household effects” are eligible for duty- and tax-free importation under the provisions of tariff item No. 9806.00.00. “Personal and household effects” may include such things as furniture and appliances; family heirlooms; antiques; musical instruments; jewellery; personal collections of coins, stamps or art; hobby items; and conveyances such as motor vehicles, boats and motors, trailers and aircraft.In addition, these goods must have been owned, possessed and used abroad by the donor.

The CBSA identifies a few areas of ineligible goods. Houses, buildings and large trailers used as residences, any goods that are commercial in nature, and any goods that were used by the donor in connection with a business or for commercial purposes do not qualify as personal and household effects under tariff item No. 9806.00.00.  Goods that were rented or leased by the donor are not considered to have been owned and do not meet the ownership requirement of tariff item No. 9806.00.00. There are also restrictions on the importation of certain goods into Canada such as alcoholic beverages, tobacco products and other goods that do not meet the “use” requirement and are not eligible for importation under the provisions of tariff item No. 9806.00.00. Import restrictions (e.e,g obscene materials, guns, explosives, food, plants, animals vehicles, etc.) will continue to apply.

The CBSA will request the following documentation if the donor is deceased:

  • (i) a certified true copy of the death certificate is also required; or
  • (ii) When there is no will, the following documents may also be used:
    • (a) documents issued by a probate court; or
    • (b) a statement from the executor or executrix or a legal representative who is authorized to divide the assets or interests of the deceased person’s estate.

For a good to be considered to be a “gift in anticipation of death”, the CBSA required that death be imminent.  The CBSA will ask for the following documentation:

  • (i) a copy of the donor’s will; and
  • (ii) a written testimony from the donor’s physician that the donor’s death is imminent.

If the bequest is currency, the normal reporting rules with respect to monetary instruments in excess of $10,000 will apply.  If the bequest includes an old coin collection, it will be necessary to obtain appraisals prior to importation in order to provide approximate values in the reporting.

If you are arriving with a truck or carload of goods, it would be best to prepare a list of all the goods to be imported into Canada, giving descriptions and approximate values.  This will assist with the process of completing the necessary documentation and forms.

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

Can US Customs Take My NEXUS Card at Toronto Pearson International Airport?

Posted in NEXUS

Many-QuestionsThe answer is “Yes”, and it happens on a regular basis.

Quite frankly, we have received more calls about NEXUS confiscations at Toronto Pearson Airport Pre-Clearance recently – and, it makes one wonder if a US CBP policy directive has changed. The issues that arise at U.S. Pre-Clearance at Toronto Pearson Airport are different issues than the issues we see at Canadian border crossings.

In 2014/2015, the NEXUS issues we saw most frequently at U.S. Pre-Clearance involved muffins, cookies and bananas in individual’s carry-on luggage. We would see an occasional Cuban cigar.

However, this year, we are seeing more decisions by US CBP at Toronto Pearson Pre-Clearance to confiscate NEXUS Memberships of Canadian travelers for (1) immigration matters and (2) suggestions that answers were untruthful.

For example, a client had a valid visa and was legally working in the United States. She was flying to the United States and arrived early to apply for a renewal of her Visa ahead of the expiration date. US CBP at Toronto Pearson Airport refused to process the new Visa application and cancelled the NEXUS membership.

Another client was sent to secondary clearance and was asked the usual questions. When the US CBP officer did not like the answers provided, he confiscated the person’s NEXUS Membership on the basis that answers were untruthful.

Another client (an entire family) had their NEXUS memberships cancelled because the nanny did not have a NEXUS membership. The nanny helped push the children’s strollers to the US primary desk and was asked for her identification. She was not permitted to get into the line up and the family was informed that it was too late as the “nanny had crossed the line”.

It is important to look at 8 CFR §235.12, which are the US rules relating to the Global Entry (NEXUS ) Program. 8 CFR §235.12(j)(2) provides for the suspension of a Global Entry participant as follows.

(2) A Global Entry participant may be suspended or removed from the program for any of the following reasons:

  • (i) CBP, at its sole discretion, determines that the participant has engaged in any disqualifying activities under the Global Entry program as outlined in § 235.12(b)(2);
  • (ii) CBP, at its sole discretion, determines that the participant provided false information in the application and/or during the application process;
  • (iii) CBP, at its sole discretion, determines that the participant failed to follow the terms, conditions and requirements of the program;
  • (iv) CBP, at its sole discretion, determines that the participant has been arrested or convicted of a crime or other-wise no longer meets the program eligibility criteria; or
  • (v) CBP, at its sole discretion, determines that such action is otherwise.

In short, the US CBP officers have wide latitude to cancel NEXUS privileges.

There is also an interesting article about the use of discretion by US CBP officers on the West Coast. Jeff Nagel of the Abbottsford News reports that one US CBP officer has boasted that he has denied more Canadians entry into the Untied States than any other staffer.

The issue is not that bad people get their NEXUS passes confiscated. The issue is that some good people get their NEXUS passes confiscated. Canadians use their NEXUS memberships to expedite the customs clearance process.  There is a business cost to the confiscation of a NEXUS pass. For that reason, discretion should be used properly.

If US CBP confiscates your NEXUS membership, redress may be made to the US CBP Ombudsman.  Currently, it takes 7-8 months to hear back from the US CBP Ombudsman after a letter is filed.

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

Exports of Dual-Use Goods and Technology from Canada is More Business Friendly

Posted in Border Security, Export Controls & Economic Sanctions, Legal Developments

flagsOn August 12, 2015, Canada’s Minister of Foreign Affairs caused to be published in the Canada Gazette, Part II, Vol 149, No. 16 a regulation entitled “General Export Permit No. 41 – Dual Use Goods and Technology to Certain Destinations”, SOR/2015-200. Foreign Affairs, Trade and Development Canada also published a backgrounder and Notice to Exporters No. 19 “General Export Permit – Dual Use Goods and Technology to Certain Destinations, Serial No. 194 (August 2015).  This Notice to Exporters should be read in conjunction with the regulation and the current version of “A Guide to Canada’s Export Controls” the (“Guide”).

General Export Permit No. 41 (“GEP 41”) should reduce compliance burdens on Canadian exporters of controlled dual use goods and technology when the goods are exported to an eligible destination.

The Eligible Destinations

The eligible destinations are listed in the regulation and are Australia, Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, the Republic of Korea, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States of America. This is a positive list – meaning GEP 41 can be used only when a country is listed as an “eligible destination”.  Canadian exporters selling to these countries should review the new rules to see whether they apply to their exports.

What is a GEP?

As a general rule, an exporter must obtain an export permit prior to exporting goods/items on Canada’s Export Control List (ECL).  An export permit application is submitted to the Export Controls Division of the Department of Foreign Affairs, Trade and Development. The application must be processed and an export permit issued with respect to specific goods before the goods can be exported.  If an export permit is not obtained, the goods may be seized by the Canada Border Services Agency upon export.

In limited circumstances, the obligation to obtain an export permit is altered by a General Export Permit.  Canada has promulgated a number of General Export Permits covering a variety of lower-risk goods and goods shipped to lower-risk destination in lower risk environments.

What Does GEP 41 Do?

Section 2 of the GEP 41 Regulation provides as a general rule that any resident of Canada may export  or transfer from Canada any good or technology referred to in (a) Group 1 of the Guide; and (b) items 5504.2.a to 5504.2.g of the Guide.

Section 3 of GEP 41 Regulation restricts the application of the general rule.  In particular, GEP 41 does not authorize the export or transfer of goods or technology:

  • to a country that is not an eligible destination;
  • to a country that is listed in the Area Control List;
  • to a country in respect of which an order or regulation has been made under section 4 of theSpecial Economic Measures Act or section 2 of the United Nations Act;
  • that are intended to be used in a country that is not an eligible destination;
  • that are referred to in the Schedule of GEP 41 Regulation (which can be amended);
  • that are referred to in any item in the Guide other than those referred to in Section 2, unless the export or transfer is so authorized by another GEP;
  • that are referred to in any of subparagraphs 3(2)(c)(i) to (iii) of the Export Permits Regulations;
  • that is software that is specifically designed or modified for the development or use of the goods or technology referred to in item 5504.2.h or item 5504.2.i of the Guide; and
  • that is technology that is specifically designed or modified for the development or production of the goods or technology referred to in item 5504.2.h or item 5504.2.i of the Guide.

Section 4 sets out the what information must be provided to the Export Controls Division prior to the first use of GEP 41.

Section 5 sets out the record keeping requirements – including a 6 years retention requirement.

Section 6 of the GEP 41 Regulation cancels two outdated GEPs, being (i) General Export Permit No. Ex. 30 – Certain Industrial Goods to Eligible Countries and Territories and (ii) General Export Permit No. Ex. 29 – Eligible Industrial Goods.

For more information or if you’d like to assess specific facts, please contact Cyndee Todgham Cherniak at 416-307-4168 or atcyndee@lexsage.com. Alternatively, visit www.lexsage.com.

What is a No-Names Customs Voluntary Disclosure?

Posted in Cross-border trade, Customs Law, origin, tariff classification, valuation
Customs Building (XL)The Canada Border Services Agency (“CBSA”) permits importers to make a “no-names” disclosure in order to request advice from the CBSA as to the possibility of a successful voluntary disclosure (like a prior disclosure in the USA).
In the case of a no-names voluntary disclosure, the CBSA does not require the importer’s representative to give the importer’s name (if the importer attempted a no-names disclosure, the identity is given to the CBSA in the process of coming to chat). Discussions are informal, non-binding and general in nature.  Often the CBSA requests a postal code of the importer and have accepted the name of the town if the postal code given a single building or the identity of the importer can be determined by way of a simple address search.
The no-names voluntary disclosure process is primarily intended to provide insight into the voluntary disclosure process.  The importer or their representative may obtain a better understanding of the risks and relief available. For example, an importer may determine how may years of information the CBSA will require (and for how many years back they are going to have to calculate duties and goods and services tax payable).The CBSA will respond to written requests for no-names disclosures based on information provided and will be bound by the response for 90 days after the opinion is provided (See D-Memorandum D-11-6-4 “Relief of Interest.or Penalties Including Voluntary Disclosure).

It is important to note that a decision to not proceed with a voluntary disclosure leaves open the risk of a verification and the CBSA assessing customs duties and GST (and interest and penalties). If a no-names voluntary disclosure is not undertaken with care, the CBSA may commence verifications of a particular H.S. code under a targeted verification strategy/priority.

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