Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

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 the Special 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.

If you require more information or would like to assess specific facts, please call Cyndee Todgham Cherniak at 416-307-4168.


Why Are Companies Not Taking Advantage of FTA Benefits?

Posted in Canada's Federal Government, Corporate Counsel, Cross-border deals, Customs Law, Export Controls & Economic Sanctions, Exports, Harmonization, NAFTA, U.S. Federal Government

Shipping Container Above Stacked OthersAccording to a Thomson Reuters-KPMG International Survey/Report, 70% of multi-national companies surveyed are not fully utilizing the benefits under existing free trade agreements (FTAs).  A problem has been reported to be complex and disparate compliance requirements in home jurisdictions and other jurisdictions.

As an international trade lawyer, I hear this often.  Many North American multi-national companies do not claim NAFTA benefits when importing goods from another NAFTA Party.  This is because the act of claiming NAFTA tariff treatment allows customs officials to come and visit.  The completion of a certificate of origin permits customs officials to visit an exporter and that exporter will be required to prove that the good meets the NAFTA rule of origin. To prove to another Party’s customs officials that a good satisfies a rule of origin requires documentation to be maintained and provided.  Sensitive costing information may need to be reviewed.  Documents relating to sensitive commercial relationships may need to be reviewed.  The secret formula may have to be provided.  Some companies say “Why bother?” and they avoid the trouble that NAFTA treatment will bring. Instead, they chose to not seek NAFTA beneficial treatment and importers pay more customs duties for the goods.

Furthermore, many small-to-medium sized businesses do not have and cannot afford to implement solutions to manage vast amounts of information.  Many companies use manual processes rather than computerized solutions.  Customized computer programs are expensive (and you have to keep documentary records in any event). Since the rules are not the same under each FTA and new FTAs are being negotiated constantly, the computerized program is complex to stat with and may be outdated soon after implementation.

These issues are complex and become more complicated with each FTA. However, as companies avoid taking the first steps, they get further and further behind.

The first step in getting started is to identify where cost (customs duties) savings are possible in the supply chain.  Then the cost savings should be quantified.  Then the budget can be developed to bring about the simple changes.  As time goes on, more changes can be made.


Trans-Pacific Partnership Agreement (TPP) Text Released

Posted in Trade Agreeements

iStock_000019169483XSmallToday, New Zealand released the text of the Trans-Pacific Partnership Agreement on the New Zealand Ministry of Foreign Affairs and Trade web-site.  The TPP text was also released on a Trans-Pacific Partnership American web-site.  I would expect that Canada will also post the TPP text in the coming days.

Trade lawyers, pundits, governments, and interest groups can now review the text and the discussion of the good and the bad will continue.

In Canada, there is a new government.  The Harper Government (Conservative majority) negotiated the TPP.  Now, the Trudeau Government (Liberal majority) will be tasked with implementation. The Trudeau Government is in an envious position (vis-a-vis other TPP partners) because hey can talk openly about the flaws in the agreement and distance themselves from the hard decisions that were made at the negotiation table.

Canada Has A New Government – What USA Lawyers Should Know

Posted in Aerospace & Defence, Agriculture, Anti-Trust/Competition Law, Border Security, Canada's Federal Government, Environment, Export Controls & Economic Sanctions, Government Procurement, Transportation, U.S. Federal Government

On November 4, 2015, the Trudeau Government was sworn into power at Rideau Hall (that is where Canada’s Governor General lives) in Ottawa.  Prime Minister Justin Trudeau appointed his Cabinet (orders-in-council and regulations are promulgated by this group of law-makers).USA lawyers should know the following about the new Ministers (many are similar to US Secretaries, except they are all elected officials):

1. The new Minister of International Trade is Chrystia Freeland. Ms Freeland has written two books – Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else in 2012 and Sale of the Century.  I suggest that US trade lawyers read these books.  Ms. Freeland also is a former journalist.  Ms. Freeland speaks many languages, including Russian and Ukrainian.

2. The new Minister of Foreign Affairs is Stéphane Dion: Mr. Dion was previously Prime Minister and leader of the Liberal Party (after PM Paul Martin).  Mr. Dion will likely not be as ideological as John Baird and unilateral economic sanctions may not be his preferred approach to world issues.

3. The new Minister of Public Safety and Emergency Preparedness is Ralph Goodale.  The Minister of Public Safety and Emergency Preparedness overseas the Canada Border Services Agency. Mr. Goodale held position in previous Liberal governments.  He understands the issue of security.

4.  The new Minister of Environment and Climate Change is Catherine McKenna.  Ms. McKenna is a lawyer.  I do not wish to be disrespectful to her in my next comment – I must keep it authentic.  The most interesting aspect of her appointment is the name change of the Ministry itself – the Ministry now has “Climate Change” in the name.  Words must have meaning – no? I think that Ms. McKenna will be taking Canada in a different direction in a few weeks in Paris.

5. The new Minister of Justice is Jody Wilson-Raybould.  Ms. Wilson-Raybould has an impressive resume; but it is who she is that is very interesting. Ms. Wilson-Raybould’s ancestors are Kwakwaka’wakw, one of Canada’s indigenous peoples.

6. The new Minister of Innovation, Science and Economic Development is Navdeep Bains.  Mr. Bains holds the portfolio that used to be known as Minister of Industry (portfolio includes Industry Canada).  I know Mr. Bain and he is very intelligent and personable. His Deparment will be responsible for the new Investment Canada reviews under the Canada-EU CETA and the TPP.

7. Half of the Cabinet positions are women.  This is because there are many capable women who ran for the Liberal Party and were elected.

8. Many of the Ministers are young.  Prime Minister Trudeau is 43 years old (he will be 44 on Christmas Day). But, do not underestimate them – young people have more energy – the world will have to keep up.

9. The Department of Foreign Affairs, Trade and Development Canada is now called Global Affairs Canada.

10. Citizenship and Immigration Canada is now called Immigration, Refugees and Citizenship Canada.

11. Industry Canada is now called Innovation, Science and Economic Development Canada.

12. Public Works and Government Services Canada is now called Public Services and Procurement Canada.

13. Environment Canada is now called Environment and Climate Change Canada.

The complete list of Cabinet is:

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An Australian Lawyer’s Perspective on the Trans-Pacific Partnership Agreement

Posted in Trade Agreeements

dealMy good friend (a trade lawyer) from Down Under Australia, Andrew Hudson at Gadens has written the following about the TPP Trade Agreement:

Atlanta – we have a deal on the TPP

After 5 years of negotiations and a last minute “go around” at the recent Maui meetings, the FTA equivalent of Papal white smoke has appeared in Atlanta with an announcement that a deal has been struck on the TPP.  The deal includes 12 countries, some of whom are already parties to FTAs with Australia and some of whom are not parties to FTAs with Australia already (Canada, Mexico and Peru)

While no deal is perfect the TPP appears to offer significant gains for Australia.  Based on reports in today’s press, Australia has seemingly advanced its existing agenda in terms of export of goods and services (including access in the Government Procurement market) and improved the environment for outbound and inbound investment.  This includes improved outcomes on beef, sugar, rice, dairy, cereals and seafood exports as well as reductions on duties on imported goods to assist Australian businesses and consumers.

There are some ground – breaking provisions compared to other FTAs.  One deals with the potential anti – competitive behaviours of State Owned Enterprises and Designated Monopolies and another seeks to specifically improve the position of SMEs whose interests are often overlooked.  Reports suggest that there are good outcomes on labour, environment and anti – corruption.

Importantly there seems to be one set of Rules of Origin, provision for accumulation of origin status through production across the region and a regime which will not require Certificates of Origin to claim preference.    This is a more liberal regime than which exists under other FTAs.

We now await the text of the Agreement and will no doubt wait much longer for the approval by contracting countries which could well be delayed by forthcoming US and Canadian elections.

I will be issuing a longer commentary on the TPP and its provisions later in the week


The Trade Remedies Chapter of TPP Will Bring Opportunities for Trade Lawyers

Posted in Agriculture, Antidumping, Cross-border trade, Legal Developments, Trade Remedies

Shipping Container Above Stacked OthersTrade lawyers may have new tools in their tool belt as a result of the Trans-Pacific Partnership Agreement (TPP). So often when one reads about a free trade agreement, a Chapter will jump out as interesting.  Canada has not included a Chapter on trade remedies since NAFTA and the Canada-Chile free trade agreement.  As a result, the inclusion of a Chapter in the TPP on trade remedies may cause a trade lawyer or manufacturing business or exporter to take notice.

Canada has prepared  technical summaries on the Chapters of the TPP and posted the summaries on the Foreign Affairs, Trade and Development Canada websiteCanada’s summary about the TPP’s Trade Remedies Chapter states as follows regarding TPP provisions:

  • Reaffirms WTO rights and obligations with regards to trade remedies.
    • Includes provisions relating to the use of anti-dumping, countervailing, and global safeguard measures.
  • Reinforces certain international best practices in anti-dumping and countervail investigations, while still protecting domestic producers from unfair trade practices.
  • Allows for, in exceptional circumstances, bilateral safeguard measures (e.g. temporary tariff increases) to protect domestic industry from injury following a surge in imports as a result of the Agreement.
    • Ensures that these safeguard measures are not used as a barrier to trade, but rather are limited to remedying legitimate situations of injury.
    • It does so through a number of substantive and procedural requirements governing the safeguard measures.

Does this man that there will be a country specific safeguard mechanism in respect of goods from Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States?  Does this many that Canadian manufacturers can bring a safeguard case against the United States or Mexico?  If yes, this is a significant development.

What does “reinforces certain international best practices in anti-dumping and countervail investigations” mean?  Are there enhancements in these areas that could not be agreed at the World Trade Organization?  Are there new arguments available for importers and exporters? What does this mean for Canadian softwood lumber exporters?

We must wait for the text of the TPP agreement to be released.  I, for one, am looking forward to reviewing the Trade Remedies Chapter.  I know, I am a trade geek.

Canada is a Party to the Historic Trans-Pacific Partnership Agreement

Posted in Aerospace & Defence, Agriculture, Anti-Trust/Competition Law, Border Security, Canada's Federal Government, Cross-border deals, Cross-border trade, Customs Law, Government Procurement, Intellectual Property, International Arbitrations, Legal Developments, Trade Agreeements

iStock_000019169483XSmallOn October 5, 2015, the trade ministers of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States signed the Trans-Pacific Partnership Agreement (TPP).  TPP is a historic trade agreement.  TPP is a comprehensive trade agreement.

For Canada, TPP represents a trade agreement with new parties (Australia, Brunei, Japan, New Zealand, Singapore and Vietnam) and an improvement/extension of existing trade agreements (Chile, Mexico, Peru and the United States).  It is a step forward in a market of 800 Million people and countries with 40% of the World’s GDP. Eighty one percent of Canada’s total exports are currently destined to TPP member countries.

The text is not yet available.  However, Canada has presented a summary on the TPP on the Foreign Affairs, Trade and Development Canada website.  The technical summary covers the following areas (each with its own summary):

Technical Summary of the Agreement

This is a good day. Canadian businesses will gain preferential access to the emerging markets in the Asia-Pacific region.  Tariffs will be reduced immediately (upon ratification of the TPP) or over time on almost all goods.  Service providers will also benefit.

Over the next few weeks, we will be blogging on various aspects of the TPP.

Canada’s Procurement Review Procedure Accessible to Small-to-Medium Sized Businesses

Posted in Canada's Federal Government, Cross-border litigation, Government Procurement, Tribunals, Uncategorized

Canadian parliamentCanada has a federal government procurement bid challenge mechanism that has been made somewhat user-friendly to small-to-medium sized businesses.  Chapter 10 of the North American Free Trade Agreement and equivalent chapters in other free trade agreements and the WTO Agreement on Government Procurement require that Canada establish a bid challenge mechanism.  Canada has done so.

A bid challenge is filed with the Canadian International Trade Tribunal (“CITT”) within 10 working days of the date the basis for the complaint became known (e.g., the federal government contract was awarded to another bidder who did not meet the mandatory criteria in the RFQ). This is an important deadline.

The CITT has created a form that Complainants may complete and file.  The CITT also has prepared instructions for the completion of the form.  These two documents may be completed without the assistance of a lawyer (or with the assistance of a lawyer).  The ease of completing a form and the instructions improve the access to justice by small-to-medium sized businesses.

The Instructions also contain a checklist, which is useful to small-to-medium sized businesses who bid on federal government contracts in Canada.  This information can be maintained on a file-by-file basis so that it is easier to file a complaint with the CITT should something go wrong.

The Instructions also contain timelines, which inform potential complainants of what to expect and when.

Tips re Cybersecurity

Posted in Border Security, Corporate Counsel, Cross-border deals, Government Procurement, Politics

Los Angeles City Attorney Mike Feuer recently provided tips to aid individuals to protect themselves from identity theft:

  • Shred all documents containing personal, financial or medical information before you throw them out.
  • Be cautious using debit cards. Don’t use at gas pumps or for shopping online.
  • Don’t respond to e-mails, calls or texts seeking sensitive information. Legitimate companies don’t seek customers’ information this way.
  • Create strong passwords that mix letters, numbers and special characters, and use different passwords for different accounts.
  • Lock your mailbox. Stolen mail is a leading cause of identity theft.
  • Don’t keep your license, title and registration in your glove compartment.

While the list is short, it contains some very timely and practical tips. Similar advice would be valuable for companies to prevent hacking and would look like this –

  • Make sure your firewalls, anti-spam, anti-piracy and all other software is updated regularly and on a timely basis.
  • Regularly train employees so they are aware of the types of electronic messages which will likely lead to unauthorized access to your system.
  • Be cautious about electronic requests to wire transfer funds. Are they properly authorized and validated to be from the party who seems to have sent them?
  • Regularly train employees on how to respond to e-mails, calls and other inquiries seeking sensitive company or customer information.
  • Require system users to create strong passwords that mix letters, numbers and special characters; require the use of different credentials for different accounts.
  • Require vendors and others with access to your system to have a level of security of their own systems which is compatible with your requirements.
  • Update your contracts to hold outsider users liable if they cause your system issues/failures due to their own ineptitude.