Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Prescribed Form for Reporting Exports of Controlled Goods From Canada

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

On January 17, 2014, the Canada Border Services Agency posted Form BSF728 “”Electronic Export Reporting of Controlled Goods Process“. This form is required pursuant to section 95 of the Customs Act (Canada),  which requires “all goods that are exported shall be reported at such time and place and in such manner as may be prescribed.”  The Form BSF728 is a prescribed form.

Notwithstanding the general rules that “all goods that are exported shall be reported”, the Governor-in-Council (the Cabinet) may promulgate regulations that exempt classes of goods from the reporting requirement.  The Reporting of Exported Goods Regulations sets out the exemptions (see sections 6-8).  For example, exporting commercial goods valued at less than $CDN 2000 is exempt from the reporting requirement.  The corollary is that exported commercial goods valued at more than $CDN 2000 must be reported unless a different exemption applies.

Failure to report exported goods as required is an offence under subsection 160(1) the Customs Act.  False statements on the form may be an offence under section 153 of the Customs Act.


What is a Detailed Adjustment Statement?

Posted in Customs Law, Trade Remedies

A detailed adjustment statement (also called a DAS) is the term used by the Canada Border Services Agency (CBSA) for an assessment or reassessment of duties (customs, excise, anti-dumping, countervailing) or penalties.  A DAS may be issued with respect to the original assessment/reassessment by the CBSA or after a request for redetermination.  The same for of document is used and it is important to understand the stage of the disagreement with the CBSA.  A careful review of the DAS will indicate what type of DAS has been issued and the next steps in the process.

Let’s review some of the important areas on the DAS.

Box 1 indicates the name of the importer of record and their address.  Generally, this is the person who must pay the amount assessed/reassessed in the DAS.  Generally, this is the person who must file a request for redetermination.  That being said, there are circumstances wher an exporter may file a request for redetemination (for example, an exporter in a NAFTA country may appeal certain origin determinations made by the CBSA).

Box 2 indicates the number assigned to the DAS.  This is the number that must be quoted when referring to the DAS.

Box 6 is the original transaction number.  This is the number issued by the CBSA at the time of the entry of the goods into Canada. Ask your customs broker to provide the information filed with the CBSA in connection with this original transaction number.  Usually this is the best method of matching the DAS to the commercial invoice and bill of lading.

Box 7 is the date of the original release of the goods by the CBSA.  This will help an importer determine the transaction that is being assessed/reassessed.  This date is also relevant for determining whether the DAS has been issued within the statutory limitation period.

Date of Decision is the date of the DAS.  This box next to Box 14.  Start counting from this date.

The DAS will set out assessments/reassessment based on the line of the original B3 Customs Coding Form and the original information provided.  The assessed duties (not the original amounts declared as owing) will be indicated.

The DAS should set out the reason for the assessment/reassessment after the transaction line by transaction line assessment(s).  Often the reasons provided are limited and information must be obtained from the CBSA directly or by way of an access to information request.

The DAS indicates the statutory provisions pursuant to which the assessment/reassessment has been made.   Usually, the DAS indicates whether the DAS relates to customs duties, anti-dumping/countervailing duties or excise duties.  Usually, the customs duty DAS will indicate if the issue is a tariff classification issue (and the line items will show the CBSA’s tariff classification number in box 21), a origin issue (and box 12, 13 or 25 will provide more details about origin determinations by the CBSA) or a valuation issue (and box 31 usually indicates the changed value for duty). Usually, the DAS provides the statutory limitation period (such as 90 days), but does not give the date by which a request for redetermination or appeal must be filed. We strongly recommend diarizing the deadline as soon as the DAS is received.

The last page of the DAS summarizes the assessed/reassessed amounts.  This is the page that gives the total of the amount owing for customs duties, SIMA duties, GST, excise duties, interest and penalties. The last page also gives the deadline for paying the DASsed amounts at the prescribed rate of interest.  If the DASsed amounts are not paid by that date, the interest rate increases to the specified rate of interest (which is higher than the prescribed rate of interest).

As soon as a DAS is received, the importer of record identified in Box 1 should determine whether he/she wishes to file a request for redetermination or appeal.  It is at this time that the importer should start to gather the relevant documentation needed to support the request for redetermination/appeal.  The importer or record should not wait until the last day to consider the documentation to be provided to demonstrate that the CBSA is incorrect.  Often the DAS is sent by the CBSA to the customs broker and the importer of record does not receive the DAS immediately,  It is important for these documents to be provided to the importer of record as quickly as possible.

For more information about how to respond to a DAS, please do not hesitate to contact us.

The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 2

Posted in Aerospace & Defence, Border Security, Controlled Goods Program, Export Controls & Economic Sanctions

Yesterday, we published “The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 1″.  Today, we are providing the second part of the blog post.

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 controlled goods must obtain an export permit from the Trade Controls Bureau prior to exporting the goods.

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

R = Registration – Canadian companies may be required to register with the Controlled Goods Directorate of Public Works and Government Services Canada with respect to domestic transfers of certain controlled goods on Canada’s Export Controls List.  Companies are required to maintain a security plan, undertake security assessments of employees who are involved with controlled goods, appoint a designated officer and maintain detailed records concerning inbound and outbound transfers of controlled goods, including technical data sheets.

S = Sanctions – Canada imposes multi-lateral and unilateral economic sanctions against a number of countries,

T = Trade Controls Bureau – The Trade Controls Bureau (TID) of the Foreign Affairs, Trade and Development 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 = XO – XO means executive officer.  Any compliance program must have the support of executive officers in order to be successful.

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.

The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 1

Posted in Border Security, Export Controls & Economic Sanctions

As 2014 begins, we want exporters in Canada to succeed in their export trade activities.  Here is an alphabetical guide to some the relevant Canadian export controls and economic sanctions issues.

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 and Belarus are on the Area Control List.

B = Blocking Orders – Pursuant to the Foreign Extra-territorial Measures Act, the Attorney General of Canada may issue a blocking order to prevent a Canadian company from refusing to export to a stated country (e.g. Cuba).

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 – Encryption Software – An exporter of encryption software, and related information technology goods may require an export permit (or multi-destination permit) before exportation of these goods from Canada.  Few exporters realize that any software can be subject to export controls.

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’s most severe export sanctions are in respect of 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.

Please come back tomorrow for The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 2.

Canada Border Services Agency Commences Copper Pipe Fittings Reinvestigation of Normal Values

Posted in Trade Remedies

On January 15, 2014, the Canada Border Services Agency (CBSA) commenced a reinvestigation of of the normal values and export prices of certain copper pipe fittings originating in or exported from the United States of America, the Republic of Korea and the People’s Republic of China (China) and the amounts of subsidy of the same products originating in or exported from China.

The subject goods are described as solder joint pressure pipe fittings and solder joint drainage, waste and vent pipe fittings, made of cast copper alloy, wrought copper alloy or wrought copper, for use in heating, plumbing, air conditioning and refrigeration applications, originating in or exported from the United States of America, the Republic of Korea and the People’s Republic of China.  A complete list is available.

The re-investigation is part of the CBSA’s ongoing enforcement of the Canadian International Trade Tribunal’s findings of material injury issued on February 19, 2007. The findings were subsequently reviewed and continued on February 17, 2012.  It is anticipated that this re-investigation will be concluded by May 30, 2014.

The last reinvestigation commenced on September 26, 2012 and concluded on February 8, 2013. In 2013, the following exporters (listed by country) received normal values:

United States

Elkhart Products Corporation

Mueller Industries Inc.

Nibco Inc.

Republic of Korea

Jungwoo Metal Ind. Co., Ltd.

People’s Republic of China

Zhuji City Howhi Air Conditioners Made Co., Ltd.


Additional exporters may participate in the current reinvestigation process if they wish to sell copper pipe fittings into Canada.  If distributors in the United States wish to be able to sell copper pipe fittings to Canada (other than Nibco, Elkhart and Mueller), they will have to obtain normal values.

The CBSA’s reinvestigation schedule does not allow much time to decide whether to participate.  Work on the exporter RFIs should be started quickly.

Play in Again Sam – CBSA Updates Royalties and License Fees Memoranum

Posted in Cross-border trade, Customs Law

On January 14, 2014, the Canada Border Services Agency (CBSA) issued a revised version of D-Memo D-13-4-9 “Royalties and License Fees”.  The revisions do not involve extensive changes to the CBSA’s existing policies.  The revised version of the D-Memo includes only minor amendments of a housekeeping nature.

This presents an opportunity for importers of goods into Canada (and especially subsidiaries of foreign parents or multinational entities) to review whether they are properly adding royalties and license fees to the price paid or payable in the proper circumstances and at the appropriate time as required by the Customs Act (Canada) and CBSA policies.  Take a moment to review D-Memorandum D-13-4-9 (it is not very long).  Pay particular attention to Appendix A, which contains 6 somewhat helpful examples.

Also review Appendix 6, which is the CBSA’s view of 3 court cases:

1. Polygram (AP-89-151 and AP-89-165 (CITT));

2. Reebok (AP-92-224 (CITT) and A-642-97 (Federal Court of Appeal); and

3. Mattel Canada (2001 SCC 36 (Supreme Court of Canada).

While there may be (are) additional legal interpretation of these cases, the CBSA’s Appendix B summaries of the jurisprudence provides useful guidance about how the CBSA sees the decisions.  They are communicating how they plan to apply the decisions.

If your activities are not consistent with the CBSA’s stated policies, it may be time for a discussion about risk mitigation and potentially a voluntary disclosure.

Know the Rules: Canada Border Services Agency Releases Revised NEXUS Membership Guide

Posted in NEXUS

On January 13, 2014, the Canada Border Services Agency (CBSA) released a revised NEXUS Membership Guide (BSF5095).  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.

What Kind Of Wake Up Call Would You Like?

Posted in Aerospace & Defence, Border Security, Controlled Goods Program, Corporate Counsel, Customs Law, Export Controls & Economic Sanctions, FCPA/Anti-Corruption

Do you know if your customs compliance program is effective?  Do you know if your export controls and economic sanctions internal controls are working properly? Do you have any internal controls to detect payments of bribes to foreign public officials or the recording of such improper payments in your books and records?

If the answer is “No” – What kind of wake up call would you like?  Do you prefer loud alarm bells?  Do you prefer a bucket of ice cold water?  Do you prefer a shock?

If you do nothing, you may experience a wake up call that is not welcomed and unexpected.  The auditors may arrive and find serious mistakes.  A CBSA officer may arrive to conduct a verification only to find unverifiable transactions.  A disgruntled employee may download information from your computer systems and provide a neatly wrapped package to the justice officials, who will arrive with a search warrant.  There are so many scenarios of a wake up call into a nightmare.

There is only one way to prevent the nightmare scenarios and unanticipated wake up calls – that is, to implement strong and verifiable internal controls.  Senior management cannot be sure that the employees know the rules unless there is a policy manual (compliance program) that sets out the rules clearly.  Senior management cannot know that the employees know what the rules require them to do unless there is a training program.  Senior management cannot know that the employees are following the rules without internal checks and balances.  A mini internal audit is a great way to determine if there are gaps in the compliance program.  There needs to be someone who makes compliance a priority.

What is an Ascertained Forefeiture?

Posted in Customs Law

Normally, if an importer fails to declare goods or undervalues the goods, the Canada Border Services Agency (CBSA) may seize goods as forefeit and/or ascertain an amount as a penalty to get the goods back.  An ascertained forfeiture occurs when the goods cannot actually be seized (because the good cannot be located or seizing the good is impracticable). It is a civil proceeding (as opposed to a criminal proceeding) that is set out in section 124 of the Custom Act (Canada).

What normally occurs is the CBSA sends a Notice of Ascertained Forfeiture by registered mail or hand deliver it to your door.  The Notice of Ascertained Forfeiture will indicate the amount of money that is payable by the Recipient of the Notice. Usually the amount in the Notice of Ascertained Forfeiture is high enough that the recipient will take notice.

If the person against whom the ascertained forfeiture is made wishes to file an appeal, they may request the Minister make a redetermination within 30 days of receiving the Notice of Ascertained Forfeiture.  The person is required to provide all the relevant information (to overturn or reduce the amount of the ascertained forfeiture) in the request for a redetermination.

In my experience, the CBSA has issued notices of ascertained forfeiture in cases where they believe a person has been smuggling goods into Canada.  The belief may be based on information provided by USCBP or another foreign government or an informant (or a former/disgruntled business associate/spouse).  For example, the CBSA has issued Notices of Ascertained Forfeiture in respect of tobacco, vehicles and other alleged undeclared goods that are transported at non-border points.  The belief that undeclared goods have been imported into Canada may also be based on the x-ray of a box containing the receipts for an expensive watch/piece of jewelry.

Since an ascertained forfeiture is an extraordinary action taken pursuant to a statutory provision, all the preconditions set out in the law must be satisfied.  The CBSA cannot issue a Notice of Ascertained Forfeiture because it is more convenient. If the goods are subsequently seized, the ascertained forfeiture should be cancelled.  If you receive a Notice of Ascertained Forfeiture, consider contacting a lawyer because a criminal smuggling charge may also be in your future.

The Panic Call: How Many Corruption of Foreign Public Official Act Files Start

Posted in FCPA/Anti-Corruption

Based on my experience, most Corruption of Foreign Public Officials Act (Canada’s version of the Foreign Corrupt Practices Act) start with an after hours telephone call.  You can usually sense the panic through the telephone line. The caller has learned that the company (which has international activities) is under investigation for bribing a foreign public official.  He/she does not know much about the facts and even less about the law. He/she does not know what to do, what to say, or where to start.  All he/she does know is that the situation is serious.

This is the type of call that requires active listening and intense questioning.  The potential client has a lot of questions about how could this have happened and what should be done.  The lawyer must ask the tough questions in order to assess the situation AND assess whether to take on the file.  The questions about how and next steps give important information about the twists and turns the file may take (these files always have ups & downs, twists & turns).  Most importantly, this first discussion informs on whether the potential client wants he lawyer to help them manage the crisis (from a legal perspective) or agree with them that they should be able to sweep this little thing under the rug and carry on business as usual (hint: the later group are often problematic clients).

In anti-bribery cases, the newly hired lawyer has to catch up to the investigators very quickly.  The newly hired lawyer must be able to devote time to learn quickly, investigate quickly, and act quickly.  The newly hired lawyer must ask the hard question – the questions that the client does not want you to ask them.  The newly hired lawyer has to preserve the evidence – whatever that may be. The newly hired lawyer must look into the emails, texts and correspondence of employees (who have potentially engaged in wrongdoing and do not wish for you to discover their actions). The newly hired lawyer has to be prepared to investigate the person who placed the first panic call and signed he retainer letter.

Both persons on that call have adrenalin levels that are higher than normal.  Both must say, “It is go time”.