Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

What Is The Difference Between A Red/Green Olive And A Black Olive?

Posted in Agriculture, Customs Law, tariff classification

Black-or-Green-OlivesThe answer to this question is found in the recent Canadian International Trade Tribunal (“Tribunal”) tariff classification appeal case of Délices de la Forêt Inc. v. President of the Canada Border Services Agency (“CBSA”), AP-2015-018. The issue is this case was whether green and red olives in brine in a glass jar were properly classified pursuant to HS Code 2005.70.10.00 (which is duty free in the Customs Tariff) or HS Code 2005.70.90.00 (which has an 8% MFN duty rate in the Customs Tariff). The olives imported by the appellant were red and green olives of the Cerignola variety, in brine, packaged in a glass jar and originating in Italy.

The H.S. Codes at issue in the case are:

Chapter 20 – Preparations of vegetables, fruit, nuts or other parts of plants

20.05 – Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, not frozen, other than products of heading 20.06.

2005.07 – Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, not frozen, other than products of heading 20.06. – Olives

2005.70.10.00 – Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, not frozen, other than products of heading 20.06. – Olives – Olives sulphured or in brine but not in glass jars; Ripe olives in brine

2005.70.90.00 – Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, not frozen, other than products of heading 20.06. – Olives – Other

The case could have been decided on the basis that the glass jar packaging resulted in H.S. Code 2005.70.10.10 being not applicable.  However, the Tribunal focused on whether green olives and red olives are ripe olives.  The Tribunal found that red and green olives are not ripe olive.  Only black olives are ripe olives and that black olives can be coloured or dyed and still be ripe olives.  The Tribunal stated:

“The Tribunal is of the view that the interpretation of the expression “ripe olives” put forward by Délices de la Forêt is not supported by the preponderance of the evidence or in the context of tariff item No. 2005.70.10. On the basis of the evidence, the Tribunal concludes that a ripe olive is an olive that was harvested when it was completely mature or almost mature, which can be noted by the olive’s characteristic black colour.”

The Tribunal accepted the testimony of an expert who opined that:

 

  • a ripe olive is an olive that has reached its full ripeness, not merely its optimal size;
  • the olive’s properties change during its ripening on the tree, for example, with respect to the growth of its flesh, its taste and its oil content;
  • an easily observable, fundamental marker of an olive’s ripeness is its colour, which changes with each particular stage of the fruit’s ripening;
  • three types of olives normally recognized in the food science field: (a) unripe green olives; (b) semi-ripe olives (changing colour, purplish tinge); and (c) ripe, black olives; and
  • all three types of olives are used in the industry and that green olives are most frequently used because of, among other things, their resistance to bruising.

Why is this case important?  This case presents an example of the cost of not undertaking tariff classification reviewed prior to importing goods from an MFN country.  The importer will have to pay customs duty in the amount of 8% of the value for duty of the imported olives plus additional good and services tax plus interest. Depending on the volume of olives that were imported and the number of transactions during the reassessment period, the reassessment could be costly or not.

This case presents a perfect example of the importance of the words in the H.S. Code.  A green olive has one H.S. Code and a black olive has a different (and preferable) H.S. Code.  An analysis of the words in the H.S. Code provisions is important and often not undertaken.  Questions should have been asked about the meaning of the word “ripe” in the H.S. Code.  The question that should have been asked by the importer is whether green olives are ripe olives or not? Internet research on olives provides reason to ask questions.  One reputable source of information on Cerignola olives indicates that “[b]lack cerignolas or the ripe ones are softer compared to unripe cerignolas which are the green ones. It can be added in a variety of dishes including salads, pastas, and meat dishes.”

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

Appeal Process for Truckers/Carriers When The CBSA Issues ACI eManifest AMPs

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

MINOLTA DIGITAL CAMERA

Truckers (highway commercial carriers) can appeal the imposition on administrative monetary penalties (AMPs) imposed by the Canada Border Services Agency (CBSA) for failure to meet advance commercial information (ACI) reporting requirements.  The appeals are filed with the CBSA, Recourse Directorate.  We spoke to a source at the Recourse Direcotrate this week who informed us that there has been a significant increase in appeals of ACI AMPS penalties.

As of January of 2016, highway carriers transporting goods into Canada are required to transmit cargo and conveyance data electronically to the CBSA prior to arrival. The cargo and conveyance data must be received and validated by the CBSA a minimum of one hour before the shipment arrives at the border.

Certain Common AMPS

The AMPs penalties can be costly. For example, AMP C379 relates to a failure to submit advance information in the prescribed time or prescribed manner to the CBSA. For the first infraction, the penalty is $250; for the second infraction, the penalty is $375; and for the third and subsequent infractions, the penalty is $750 per instance. The AMPs penalty is imposed on a per instance basis.  Prescribed information must be transmitted in the prescribed trimeframe and in the prescribed manner.  These two separate obligations must be satisfied.  A contravention against any one obligation could result in the imposition of a penalty.

If the ACI information is received after arrival, the CBSA will more likely apply AMP C378, which relates to a failure to submit the prescribed pre-load/pre-arrival information relating to the cargo and/or conveyance.  The AMPs penalty is imposed on a per instance basis.  This AMPS penalty is applied when the pre-load/pre-arrival information is not provided in accordance with the timelines, technical requirements, specifications and procedures for electronic means as set out in the Reporting of Imported Goods Regulations and the applicable Electronic Commerce Client Requirements (see also D-Memorandum D12-3-1 Pre-Arrival Highway). For the first infraction, the penalty is $2000; for the second infraction, the penalty is $4,000; and for the third and subsequent infractions, the penalty is $8,000 per infraction.

The transmission of ACI data does not constitute a reporting for Customs Act purposes.  The CBSA will impose AMP C023 relating to a failure to report conveyances inbound and/or upon arrival.  For the first infraction, the penalty is $2000; for the second infraction, the penalty is $4,000; and for the third and subsequent infractions, the penalty is $8,000 per infraction.

AMP C375 relates to a failure by a person to transmit Conveyance Arrival Certification Message (CACM) as the Governor-in-Council may prescribe.  The penalty is issued on a per conveyance basis. After the July 10, 2015-anuary 10, 2016 grace period, for the first infraction, the penalty is $2000; for the second infraction, the penalty is $4,000; and for the third and subsequent infractions, the penalty is $8,000 per infraction.

More AMPs penalties are outlined in the Master Penalty Document.

We recommend that highway commercial carriers who transport goods into Canada implement a compliance protocol for ACI reporting. Fix any bugs discovered in connection with filing ACI eManifest submissions, implement a process to proactively identify errors, omissions, or other non-compliance and provide updated accurate information immediately. The implementation of internal controls may result in more efficient border processing by the CBSA and reduce delays and costly monetary penalties.

Appeals:

If a wishes to appeal/dispute the imposition of an AMPs penalty, a request for a Ministerial decision can be made to the CBSA‘s Recourse Directorate.  Requests for a Ministerial decision must be submitted within 90 days from the day the Notice of Penalty Assessment was served.  In exceptional circumstances, the filing deadline may be extended to one year.

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

CBSA Has Revised The D-Memorandum On The Anti-dumping/Countervailing Duty Re-determination Process

Posted in Antidumping, Trade Remedies

Which wayOn June 28, 2016, the Canada Border Services Agency (“CBSA”) quietly issued revised D-Memorandum D4-1-3 “Re-determinations and Appeals Under the Special Import Measures Act”.  The preamble to the D-Memorandum indicates that it was revised to reflect changes in contact information and the process to request a re-determination by the President.

Some of the important information in the D-Memorandum includes:

  1. What can be re-determined?
    A request for re-determination may cover:
    (a) the normal value;
    (b) the export price;
    (c) the amount of subsidy;
    (d) the amount of the export subsidy; or
    (e) whether the goods are of the same description as those described in the order or finding of the Tribunal or in the order of the Governor in Council.
  2. Who can file a request for re-determination?
    A request may be filed by the importer or the importer’s agent. In the case of goods of a NAFTA country, the government of that NAFTA country or the producer, manufacturer or exporter of the goods, if they are of that NAFTA country, may file a request. These requests will be reviewed whether or not the importer has paid the duties owing on the goods.
  3. Does am importer have to pay the assessed antidumping duties, GST, penalties and interest prior to the acceptance of the request for re-determination?
    Yes.  An importer, agent, NAFTA country, manufacturer or exporter from a NAFTA country may submit a request to the CBSA only if all duties owing on the goods have been paid. The CBSA will reject requests when importers have not paid the duties for the goods at issue.
  4. What is the time limit for filing a re-determination?
    A request for re-determination must be filed within 90 days of the CBSA officer’s or the designated officer’s decision.  If the 90th day after the date of the decision falls on a Saturday, Sunday or holiday, the final day for making a request for re-determination will be the next business day.  The date of receipt of a request for re-determination, or the date of the registered postmark when delivered registered mail, is considered to be the date that the request is made.
  5. How to file a request for re-determination?
    The CBSA states in the D-Memorandum that “[a] separate request on form B2, Canada Customs – Adjustment Request, must be made for every transaction with respect to the goods that are the subject of the request for re-determination, except in the case of blanket requests.”  A blanket request is a procedure through which an importer may request re-determinations on more than one transaction on a single form B2. This can be done under specific conditions, provided that both the public and the CBSA receive administrative benefits. Under the blanket request procedure, the same designated officer or President’s decision is issued with respect to each transaction included in the request. Written authorization must be obtained prior to submitting the form B2 covering multiple transactions.
  6. What should be included with a request for re-determination?
    The CBSA wishes to receive as part of the request for re-determination the following information (as attachments under field No. 37 of the B2):

(a) a statement setting out the grounds on which the determination or re-determination is contested;

(b) a statement setting out the facts on which the request for re-determination is based;

(c) evidence in support of the facts referred to in subparagraph (b) above;

(d) a copy of the original (i.e., interim and final) accounting document package;

(e) a copy of the customs invoice or a commercial invoice (which meets the CBSA’s invoice requirements);

(f) a copy of the cargo control document;

(g) copies of any required certificate(s) and/or permit(s); and

(h) a copy of the form B3-3, Canada Customs Coding Form, if available.

The CBSA identifies other documents that may facilitate an expeditious resolution of the request, such as, the purchase order or sales contract, commercial invoice and letter of credit.The CBSA informs that evidence to be submitted should include samples of the imported product, product literature/specifications, certificates of specification, and purchase documents describing the goods in detail (for example, purchase order, commercial invoice, etc.).  The CBSA also wants to receive the telephone number of someone at the company/requester to be able to discuss the request for re-determination.

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

Why Should Importers Ask The CBSA If Goods Are Subject To Anti-dumping Duties?

Posted in Antidumping, origin, tariff classification

3d human with a red question mark

Is it better to seek permission or ask for forgiveness after the fact? 

When it comes to imports of goods into Canada that may be subject to anti-dumping duties, it is better to seek an advance ruling from the Canada Border Services Agency (“CBSA”).  If you import goods and the CBSA believes that the goods are within the product description of an anti-dumping order, the CBSA may issue a detailed adjustment statement (“DAS”) (an assessment).  If the CBSA issues a DAS, the importer must pay the full amount of the DAS in order to perfect a request for re-determination (an appeal).  If the amount of the DAS has not been paid in full at the 90 day limitation period for the appeal, the CBSA will not accept the request for re-determination.  We have seen requests for re-determination (in the form of adjustment requests) returned to the importer or their advisor.

In many cases, the rate of anti-dumping duty applicable to imports under the all others rate is over 100%.  We have met many importers who did not mark up the price of the imports in an amount that exceeded the anti-dumping duty rate.  They just cannot afford the assessed amount in the DAS.

Sometimes, the CBSA does not issue the DAS for two years and they issue two years worth of DASes.  If the importer has imported a lot of the goods at issue, the amount of anti-dumping duties payable, plus additional goods and services tax plus interest calculated from the date of the importations amounts to significant money.

Also, there is no guarantee that if the importer appeals the DAS (after a failed request for re-determination) to the Canadian International Trade Tribunal (“CITT”) that the CITT will accept arguments that the goods are not within the scope of an anti-dumping order.

To avoid an unexpected and significant financial liability, it is best to ask the CBSA for an advance ruling on whether particular goods are subject to an anti-dumping order.  The question may be whether specific goods fit within a product description (that is, is it a subject good).  For example, is an aluminum baluster in retail packaging within the CITT’s anti-dumping order against aluminum extrusions from China.  There has been a case on this one and the CITT determined that finished aluminum balusters in retail packaging where aluminum extrusions within the product definition in the Aluminum Extrusions anti-dumping and countervailing duty order.

The question may also relate to whether a particular good originates in a subject country.  For example, are certain screws that are further manufactured in the United States subject to the anti-dumping and countervailing duty order against carbon steel fasteners from China and Taiwan. There has been a case on this one and the CITT determined that the term “originates” is not defined in the Special Import Measures Act and has a very broad meaning.  The CITT held in Ideal Roofing Company Limited and Havelock Metal Products Inc. that:

“In the absence of a statutory regime for determining origin in the context of SIMA, the Tribunal finds that the CBSA’s submission to rely on the dictionary definition of the term “originating” is most appropriate for the case at hand and most consistent with the past practice of the Tribunal in the context of SIMA.[47] Specifically, the Tribunal will rely on the Canadian Oxford Dictionary[48] which defines the term “origin” as “. . . a beginning, cause, or ultimate source of something . . . that from which a thing is derived, a source or a starting point . . .”[49] and “originate” as “. . . begin, arise, be derived, takes its origin . . . .”

The CBSA will consider advance ruling requests and issue biding rulings.  The importer has the opportunity to provide the relevant facts for consideration by the CBSA and include product samples.  While it may take a while to get an answer from the CBSA, the importer has better control over their financial liability by working with the CBSA where they may be questions raised.  It is better for importers to acknowledge the risk of a potential future disagreement than avoiding the question and hoping for the best.

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

8 Things You May Not Know About The International Law Aspects Of The South China Seas Decision

Posted in International Arbitrations

chessWatchers of international trade cases are looking at this historic South China Seas decision and watching for what will happen next.  News agencies are speculating about what China will do next and what the United States will do next (US ships are in the vicinity at issue in the case).  However, most people are wondering what this is all about as they have never heard of the treaty or the arbitral body that made the decision.  This is international law and most people have not been following the case.  the news about the decision is very interesting and seems to have ramifications beyond China and the Philippines.  Since most people are not aware of the basic international law elements, we thought we should share a few pieces of information.

  1. There is a very long decision written by the Permanent Court of Arbitration in the Matter of the South China Sea Arbitration before An Arbitral Tribunal Constituted Under Annex VII to the 1982 United Nations Convention on the Law of the Sea between The Republic of the Philippines v. The People’s Republic of China.  If you cannot fall asleep tonight, this long decision might be just what you need.
  2. The Philippines won the case.  See the Press Release from the Permanent Court of Arbitration.
  3. The decision is biding on the parties – unless a party wants to ignore the decision as there is no enforcement powers element to the Permanent Court of Arbitration.
  4. The proceedings were initiated in January 2013.  There is a timeline of the events in the proceeding (that do not yet include the July 12, 2016 release of the award).
  5. The United Nations Convention of the Law of the Sea Dec. 10, 1982, 1833 U.N.T.S. 397 (known in trade law circles as UNCLOS) is an international treaty that defines the rights and responsibilities of nations with respect to their use of the world’s oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources. UNCLOS is the “foundational document of modern international ocean law” and provides that the coastal states possess rights over a twelve nautical mile territorial sea as well as a 200 nautical mile exclusive economic zone. [See McDorman]
  6. The United States has signed UNCLOS, but has not ratified it.  Canada has signed and ratified UNCLOS.  China and the Philippines have signed an ratified UNCLOS.  For a full list of parties, please go to the UN Master List.
  7. It is generally accepted that significant provisions of UNCLOS are customary international law.  In 1985, the ICJ found in the Continental Shelf case (Libya v. Malta) 1985 I.C.J. 13. that it is “incontestable that the institution of the exclusive economic zone is shown by the practice of the states to have become part of customary international law.”
  8. The Permanent Court of Arbitration has been in existence since 1899.  It is an intergovernmental organization that is located in the Hague, Netherlands.  Despite the name, the PCA is not a court.  The PCA organizes arbitrations and mediations.

A Hot Story: CBSA Seizes Drugs in Boxes of Hot Peppers

Posted in Border Security, Customs Law

Customs Building (XL)On June 23, 2016, the Canada Border Services Agency (“CBSA”) intercepted two boxes of hot peppers attempting to conceal 17 bricks of suspected cocaine (approximately 20 kilograms).  The shipment was off-loaded air cargo from a flight from Port of Spain, Trinidad to Toronto Pearson International Airport.  The CBSA issued a Press Release on July 7, 2016 concerning the interception.

The Press Release stated, in part:

…During the offload, officers identified two suspicious boxes. Upon opening the boxes, officers found an abundance of hot peppers; however, underneath the peppers were 17 brick-shaped packages that were suspected to contain contraband.

All cargo on the flight was transferred to CBSA facilities for X-Ray examination while officers carried out a search of the entire aircraft. A sample of the identified packages was cut open and tested positive for suspected cocaine.

The suspected cocaine was turned over to the Royal Canadian Mounted Police.

We can learn from this Press Release.  First, the CBSA X-Rays inbound air cargo from drug-source countries.  The CBSA would have easily seen the anomaly in the X-Ray – rectangle bricks of solid organic material in among hot peppers.  The smugglers may have thought that the drug sniffing dogs could not smell the drugs over the power of the hot peppers.  The smugglers did not consider that the CBSA uses a variety of forms of technology to find illegal contraband.

Second, the boxes were air cargo.  This means that the boxes were not imported by a passenger.  Either the boxes were shipped by an identified shipper or were loaded in the air cargo compartment of the airplane.

Third, all the air cargo was transferred to an X-Ray facility.  It is likely that air cargo from Trinidad will receive extra scrutiny and there is always the possibility that the smugglers will try again.  All importers from Trinidad may experience longer delivery times as all cargo is being scrutinized more carefully.

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

The Canada-Ukraine Free Trade Agreement Has Been Signed

Posted in Canada's Federal Government, Trade Agreeements

Signing Ukraine FTAThis morning (July 11, 2016), Canada’s Trade Minister Chrystia Freeland and Ukraine’s First Vice Prime Minister Stepan Kubiv signed the Canada-Ukraine Free Trade Agreement (“CUFTA”) in Kiev, Ukraine.  Canadian Prime Minister Justine Trudeau and Ukraine’s President Petro Poroshenko watched the historic event.

After the signing ceremony President Poroshenko @poroshenko tweeted:

Canada-Ukraine Free Trade Agreement offers new opportunities for both nations.We will continue negotiations to expand scope of the agreement.

Signing of Canada-Ukraine FTAThe text of the CUFTA was released by Global Affairs Canada on their web-site this morning.

The CUFTA is a trade in goods agreement.  It does not cover services or investment.  The CUFTA includes chapters in the areas of market access for goods, rules of origin and origin procedures, trade facilitation; emergency action and trade remedies, sanitary and phytosanitary measures, technical barriers to trade, government procurement, competition policy, monopolies and state enterprises; intellectual property, electronic commerce, labour, environment, trade-related cooperation, institutional provisions, and dispute settlement.

Upon entry into force of the CUFTA, Ukraine will immediately eliminate tariffs on 86% of Canada’s current exports, with the balance to be phased out or subject to tariff reductions over periods of up to seven years. Ukrainian tariffs will be eliminated on all Canadian exports of industrial products (including aerospace, automobiles, medical-testing equipment, industrial machinery, and chemicals and plastics), fish and seafood, and agricultural products (including cranberries and cherries from British Columbia, processed foods from Ontario and Quebec, Prince Edward Island potatoes, Prairie grains and pulses, Annapolis Valley apples, beef, pork, pet food, soybeans, canola oil, animal feed, and maple syrup). Key Canadian industrial products benefiting from the elimination of tariffs include certain articles of iron and steel, articles of plastics, cosmetics, reservoir tanks and similar containers, and air compressors. Manufactured goods sold to Ukraine include medications, coking coal, pharmaceutical cultures, boring or sinking machinery, trailers and semi-trailers, and certain tractors. Ukrainska Pravda reports that President Poroshenko said that the agreement would come into effect immediately, but the implementation would take place over the course of seven years.  This means no delay for a ratification process.

Upon entry into force of the CUFTA, Canada will immediately eliminate tariffs on 99.9% of current imports from Ukraine. This includes elimination by Canada of tariffs on all industrial products, fish and seafood, and 99.9 percent of agricultural imports from Ukraine. Key products from Ukraine that will benefit from this duty-free access include sunflower oil, sugar and chocolate confectionery, baked goods, vodka, apparel, ceramics, iron and steel, and minerals.

The next step is the ratification process in Canada.  The CUFTA will be tabled in the House of Commons for review.  The Government of Canada also needs to table the Canada-Ukraine Free Trade Agreement Implementation Act in the House of Commons (in order to implement the CUFTA’s requirements in Canadian domestic law) and it must pass the House and the Senate.  The Canada-Ukraine Free Trade Agreement Implementation Act will contain the changes necessary to ensure that the agreement can take effect under Canadian law.  For example, the tariff elimination and reduction schedules must be implemented via changes to the Customs Tariff.

There are opportunities for Canadian businesses to sell Canadian goods to Ukraine on a duty free basis now (given that it will take effect immediately from Ukraine’s perspective).  If Canadian businesses wish to sell goods for which an export permit is required (e.g., military and defense equipment), the export controls rules still apply.  There also may be important government procurement opportunities in Ukraine.

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

Can A Canadian Business Make A Voluntary Disclosure For An Export Controls Violation?

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

iStock_000019169483XSmallThe short answer is “yes”. There is a procedure whereby a Canadian business or person may make a voluntary disclosure to the Government of Canada (Export Controls Division of Global Affairs Canada) for an export controls violation or infraction.  For example, if your company exported controlled goods (e.g. encryption technology, dual-use goods) without an export permit, there is a procedure to voluntarily report the mistake.

In the “Annual Report for the Year 2015: Annual Report to Parliament on the Administration of the Export and Import Permits Act“, Global Affairs Canada reported that 37 voluntary disclosures had been made in 2015. In the “Annual Report for the Year 2014: Annual Report to Parliament on the Administration of the Export and Import Permits Act“, Global Affairs Canada reported that 41 voluntary disclosures had been made in 2014.

Global Affairs Canada writes the following in the Reports concerning the voluntary disclosure process:

The Export Controls Division recognizes that, on occasion, responsible exporters inadvertently fail to comply with the EIPA. Exporters finding themselves in such a situation are encouraged to disclose any incidents of non-compliance to Global Affairs Canada as soon as possible. The Export Controls Division looks favourably upon disclosures if, after considering the information provided, it is satisfied that the exporter has fully cooperated and that no further action is warranted. Depending on the gravity or overall circumstances of a case, the Export Controls Division may nonetheless refer disclosures to CBSA or RCMP for further review.

The Export Controls Handbook – Administrative Procedures described the voluntary disclosure process as follows:

G.7. Disclosures of Non-Compliance
The Export Controls Division recognizes that, on occasion, responsible exporters inadvertently fail to comply with the Export and Import Permits Act.  We encourage all exporters finding themselves in such a situation to disclose any incidents of non-compliance to us as soon as possible.

The Export Controls Division looks favourably upon disclosures if, after considering the information provided, we are satisfied that the exporter has fully cooperated and that no further action is warranted.  Depending on the gravity or overall circumstances of a case, we may nonetheless refer disclosures to the Canada Border Services Agency or the Royal Canadian Mounted Police for further review.

G.7.1. Disclosure Procedures
Any voluntary disclosure must be accompanied by a cover letter, signed by a senior company officer and addressed to the Director, Export Controls Division, Foreign Affairs, Trade and Development Canada, 125 Sussex Drive, Ottawa, Ontario K1A 0G2, which clearly states that its purpose is to disclose non-compliance with the Export and Import Permits Act.  Included in the cover letter or in accompanying documentation must be the following:

  • Details of the products concerned (including technical specifications for assessment of export control status); exporters should provide their self-assessment against the Export Control List on the control status of the goods or technology that was exported, including the rationale for such assessment;
  • Dates of all shipments, mode of transport, and port of exit;
  • Quantities and values of each shipment for each product concerned (including copies of the B13A or Canadian Automated Export Declaration submitted to the Canada Border Services Agency, as well as copies of bills of lading, freight forwarding, shipping or commercial invoices);
  • Contract of sale between the exporter and the final consignee;
  • For each export shipment in question, a statement as to whether the export took place intentionally;
  • Description of the circumstances underlying each export shipment in question;
  • Description of steps taken or processes and procedures put in place to ensure that where required, export permits will be obtained in future; and,
  • Any other documentation that the exporter believes is relevant to the purpose of the disclosure.

Disclosures must be submitted in writing.  You should contact the Export Controls Division for advice on the most appropriate means of submitting a disclosure of non-compliance.

It is important to note that violations of export controls laws can result in fines and imprisonment.  As a result, the voluntary disclosure process must be undertaken with careful thought.  It may be wise to commence the process with the assistance of legal counsel where you may be protected by solicitor-client privilege.  A lawyer who has been down the road before can assist with the avoidance of serious obstacles.  More importantly, a lawyer can help your company organize the information in the most favourable manner. I often tell clients that they must be prepared to “open the kimono” because if they are perceived to be hiding important details, the voluntary disclosure can go sideways quickly.  Sometimes just a lack of organization can be perceived as avoidance by the authorities.

It is also important to note that violations of the United Nations Act and/or the Special Economic Measures Act involves economic sanctions, which are different from export controls.  This blog post does not discuss voluntary disclosures of economic sanctions violations.

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

Canada, the United States and Mexico Issue Statement on Global Steel Subsidization / Dumping

Posted in Antidumping, Canada's Federal Government, Trade Remedies

North America Free Trade Agreement countries flag patch on white background.

On June 29, 2016, Prime Minister Justin Trudeau, U.S. President Obama and Mexican President Enrique Peña Nieto issues a Statement entitled “Economic Prosperity – Trade and Competitiveness.”

Hidden at the end of the Statement is the following announcement on trade remedy enforcement:

Coordination in Trade Remedy Enforcement / Addressing Global Excess Capacity

Canada, the United States and Mexico agree on the need for governments of all major steel-producing countries to make strong and immediate commitments to address the problem of global excess steelmaking capacity. This includes curtailing government subsidies and other supports that artificially maintain or increase steelmaking capacity, enhancing transparency and information sharing about capacity and production developments, and seeking robust policy commitments to address excess capacity and encourage adjustment.

The three countries further recognize the critical need for customs agencies to work together to ensure robust trade enforcement, including increased information sharing on high-risk shipments and on broader trends concerning potential circumvention and evasion. For this purpose, Canada, the United States and Mexico will establish a trilateral Customs Steel Enforcement Dialogue, designed to facilitate coordinated compliance efforts and information sharing regarding the enforcement of anti-dumping and countervailing measures on steel products.

This trilateral dialogue builds upon existing bilateral initiatives between Canada and the United States and will take place in conjunction with meetings of the North American Steel Trade Committee. It will be an important step towards ensuring that importers of potentially dumped and subsidized steel are compliant with all regulatory requirements and pay all duties owing, thereby protecting the North American steel industry from the injury caused by the dumping and subsidizing of imported goods into the North American marketplace.

What is significant in this Statement includes:

  • Canada, the United States and Mexico are agreeing to curtail government subsidies and other supports that artificially maintain or increase steelmaking capacity.  This would mean both (1) curtailing subsidies at home at the federal, provincial and municipal levels and (2) pursuing countervailing duty cases against counties who continue to subsidize steel manufacturing;
  • Canada, the United States and Mexico are agreeing to enhancing transparency and information sharing about capacity and production developments. This would mean more domestic information gathering and publication of capacity and production;
  • Canada, the United States and Mexico are agreeing to seek robust policy commitments to address excess capacity and encourage adjustment.  This means that North America may seek reductions in steel production at home as well as abroad.  This could be viewed as interference with free market principles; and
  • Canada, the United States, and Mexico will establish a trilateral Customs Steel Enforcement Dialogue.

What is likely is more trade remedies cases and more enforcement actions.  But, that is what is expected.  What could be new is that Canada and the United States will have to lead by example.  Changes will be required in North America and this might cause more harm to North American steel manufacturers than the alleged dumping, foreign subsidization and circumvention.

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

How To Apply For An Advance Customs Ruling in Canada

Posted in Cross-border deals, Cross-border trade, Customs Law, tariff classification

Which-way-150x150Many importers in Canada want to minimize the risk of an assessment of customs duties for getting a tariff classification incorrect. If an importer or exporter or foreign producer of goods cannot figure out how the Canada Border Services Agency (“CBSA”) would classify a good for customs duty tariff classification purposes, sometimes the best thing to do is to ask them.

The process by which an importer would request the CBSA’s views is by way of an advance tariff classification ruling. An advance tariff classification ruling provides certainty to the importer as to how the CBSA would a classify the good. However, it should be noted that asking the question of the CBSA opens the importer to the possibility receiving an answer with a higher rate of duty – that is, an answer the importer does not like.

That being said, when an importer applies for an advance tariff classification ruling, the importer is in a position to provide the CBSA with all the good evidence in support of the importer’s best case scenario (that is, the classification that leads to the lower duty rate). The importer has the opportunity to tell the CBSA what it should think. In the context of an audit or verification, the CBSA may get ideas in their own minds and it can be more difficult to change their point of view. In the context on an advance tariff classification ruling, the importer may have a better opportunity to persuade the CBSA (unless the CBSA has considered the issue before and is known to have a different point of view).

The following persons may apply for an advance tariff classification ruling from the CBSA:

  • An importer in Canada;
  • A non-resident exporter;
  • A non-resident producer of the goods in question; or
  • A person who is authorized to account for the imported goods in question, e.g. a customs lawyer or customs broker.

An advance tariff classification ruling request can be prepared in letter format (that is, there isn’t a prescribed form to compete). The CBSA asks that the advance ruling request include the following information:

  • Your name and address;
  • Your business number (if applicable);
  • A statement that you are the importer, exporter, producer or authorized representative;
  • The name and telephone number of a contact person who has full knowledge of the request;
  • The principal ports of entry through which the goods will be imported;
  • A statement noting whether the item is, or has been, the subject of a verification of tariff classification, an administrative review or appeal, a judicial or quasi-judicial review, a request for a national customs ruling or other advice, or a request for an advance ruling;
  • Whether the goods have previously been imported into Canada;
  • A full description of the goods, including trade names, or their commercial, common or technical designation;
  • The composition of the goods;
  • The process by which the goods are manufactured;
  • A description of the packaging;
  • The anticipated use of the goods;
  • The manufacturer’s product literature;
  • Drawings and/or photographs;
  • Schematics; and,
  • The tariff classification you consider appropriate and your rationale.

In addition, you can provide any evidence that you feel is relevant, including expert’s reports, test results, testimonials, U.S. classification rulings, information from government standards bodies, information from other government bodies who enforce laws governing the goods, statements from the manufacturer, etc.

For more information about what the CBSA expects in an advance tariff classification ruling request, please refer to D-Memorandum D11-11-3.

As a general rule, the CBSA processes the advance tariff classification ruling request within 120 calendar days. If additional information is required, the CBSA will notify you in writing, and you will be given a period of 30 calendar days to provide the required information.

Based on our experience, there is benefit to working with a customs lawyer to prepare the advance ruling request. It costs a lot more money (and involves more human resources) to appeal an unfavourable ruling to the Canadian International Trade Tribunal. While this can still happen, the risk of a misunderstanding is reduced if you carefully prepare the advance tariff classification ruling request. If you obtain a favourable ruling, the savings of customs duties can start sooner.

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