Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

A “Catch 22” For Canadian Corporations Trading With Cuba – Canada’s Foreign Extraterritorial Measures Act –

Posted in Corporate Counsel, Export Controls & Economic Sanctions, Exports

It is legal under Canadian law for Canadian persons, including Canadian corporation, branches of U.S. companies and subsidiaries of U.S. companies to do business with Cuba. Canadian persons and Canadians outside Canada may sell goods and services to Cuba, with the exception of goods covered by Canada’s export control and economic sanctions laws. For example, there are restrictions under Canadian laws relating to the sale of U.S. origin goods to Cuba. Because it is legal under Canadian law to sell goods and services to Cuba and Canada is a sovereign country, the sanctions under U.S. anti-Cuba laws pose a dilemma under Canadian law. The interplay between the U.S. anti-Cuba laws and Canadian law creates a “Catch 22” situation for certain Canadian organizations.

For example, Canada’s Foreign Extraterritorial Measures Act (FEMA) creates requirements and reporting obligations in the context of certain international trading activities. FEMA is also known as Canada’s “blocking” legislation as it was enacted in 1985 to block the extra-territorial application of foreign laws to Canadian business. More specifically, FEMA was enacted to block the extra-territorial application of United States anti-Cuba laws to Canadian corporations.
Under FEMA, where Canada’s Attorney General is of the opinion that another country’s laws or rulings (its measures) may adversely affect Canadian interests in relation to international trade or commerce, he/she may issue an order prohibiting any person in Canada from complying with those laws or rulings. Only one such order has been issued, the order issued in respect of the United States anti-Cuba laws (the Foreign Extraterritorial Measures (United States) Order, 1992 – the “FEMA United States Order”).

So, what does this mean for corporations carrying on business in Canada? The FEMA United States Order:

(1) Requires a Canadian corporation and its officers and directors to forthwith give notice to the Attorney General of Canada of any directive, instruction, intimation of policy or other communication relating to the United States anti-Cuba extraterritorial measures (“Policies or Directives”) where such Policies or Directives are received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada; and

(2) Prohibits any Canadian corporation, director, officer, manager or employee in a position of authority from acting or omitting to act for the purpose of complying with the Policies or Directives or any of the U.S. anti-Cuba laws (including the U.S. Cuban Assets Control Regulations) to the extent that they operate or are likely to operate to prevent, impede or reduce trade or commerce between Canada and Cuba. The action taken or omission to act is prohibited even if compliance is only one of its purposes.

Many organizations, particularly those with a U.S. parent, may be unaware of the FEMA United States Order requirements and prohibitions, unwittingly and in good faith implementing North American, or perhaps global compliance programs that require full compliance with all applicable laws, including US. Export compliance laws. Does this sound familiar?

For organizations with roots or connections or activities in the U.S., it is not unusual to see this type of policy. Often, contracts with U.S. parties, be they suppliers, purchasers, joint venture partners or other persons, include similar provisions to protect the U.S. person from violations of U.S. law. While these provisions seem well-intentioned and consistent with a corporate policy to comply with all applicable laws, the very fact that you have agreed to ensure that you do not violate any of the U.S. anti-Cuba laws, may be a notifiable event under the FEMA United States Order.

So, what can you do? There is little guidance and no case law to provide direction and neither FEMA nor the FEMA United States Order provides further clarification as to when an action/omission taken for bona fide business purposes will constitute a prohibited or notifiable action. However challenging, Canadian corporations need to find ways to comply with both sets of requirements. It is important that policies and contracts make clear that compliance efforts will be undertaken only to the extent permitted under and otherwise in full compliance with all applicable Canadian laws.

Additionally, in-house counsel should :

(i)  Review corporate policies for violating directives;
(ii) Review and revise training programs to ensure that there are no notifiable requirements/directives and the training clearly identifies the FEMA obligations;
(iii) Review standard form contracts to ensure compliance with FEMA; and
(iv) Ensure that your officers, directors, managers and employees in a position of authority or those who are in any manner involved in your export activities or your procurement process are aware of the FEMA requirements and prohibitions and know who to call when they have questions or concerns. Those who may be involved in mergers and acquisitions or joint ventures also need to be fully aware of the FEMA obligations.

If you aren’t sure if you are compliant with the FEMA requirements, seek the assistance of an external trade law specialist.

Failure to comply with FEMA requirements and prohibitions carries penalties ranging from:

(a) for individuals:

i. on summary conviction, a fine up to $15,000 and/or imprisonment for up to two years; and

ii. on conviction on indictment, a fine up to $150,000 and/or imprisonment up to five years; and

(b) for corporations:

i. on summary conviction, a fine up to $150,000; and

ii. on conviction on indictment, a fine up to $1,500,000.

For more information about compliance or to request assistance in developing a compliance program, please contact Heather Innes at 416-350-1234 or at heather@lexsage.com or Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

15 Tips For Filing Customs Appeals In Canada With The CITT

Posted in Uncategorized

If you have received a detailed adjustment statement from the Canada Border Services Agency (“CBSA”), filed a B2 Adjustment Request and have received an unfavourable decision from the CBSA, you may appeal the CBSA’s decision to the Canadian International Trade Tribunal (“CITT”).  Customs appeals to the CITT may relate to a reassessment of customs duty in connection with a  tariff classification, origin or valuation issue. Customs appeals may also relate to an advance customs ruling relating to tariff classification, origin or valuation.  The CITT does not hear cases involving bad behaviour of CBSA officers or the CBSA seizing currency and/or NEXUS cards or the CBSA finding contraventions – those cases must be taken to the Federal Court.

Many Canadian importers are small and medium sized businesses and filing an appeal with the CITT appears to be a complicated undertaking.  Depending on the issues involved, it may not be as complicated as importers think.

Our top 15 tips for filing customs appeals are:

  1. Go to the CITT website at www.citt.gc.ca.  On the right side of the webpage, you will see “File a Customs Appeal“.  You will find a short video and an appeal form.  You may use this form to file your appeal – it is that easy.
  2. You must file your appeal within 90 days of the decision of the CBSA that you wish to appeal. Do not miss this deadline.  When you get the CBSA decision, go to a web date calculator to determined the deadline for filing.  You may file early if you would like.
  3. Think about your answers when completing the short appeal form. The CITT needs information from you.  Especially with tariff classification appeals, the CITT member assigned to your file may not have heard of your goods before (they do not know everything).  Remember, you know more about your goods and the CITT must catch up to you. Think Jerry MacGuire – “help me, help you” [and “show me the money”].  Envision the CITT asking you “How can I help you?” and help them decide in your favour.
  4. Organize your documents in a binder to have ready when you file evidence. Organize all the DASs and the original B3 documents, including commercial invoices. Organize documents relating to the goods themselves.  Organize all documents submitted to the CBSA and received from the CBSA.  Organize any research you conducted relating to the goods.
  5. Ask the CBSA for a copy of the “Functional Guidance”, which is the document prepared by the CBSA as to why they are not accepting your position.  This document may be obtained through access to information.  If it has not arrived before the Reply Brief (see below), ask the Tribunal to order the Department of Justice to produce a copy.
  6. The CITT sends you a letter accepting your appeal.  That letter sets out your deadlines.  Diarize those deadlines in your calendar.  Use the web date calculator.
  7. If you think you may need an expert to testify, hire that expert as soon as possible – it is best to hire the expert before the Appellant’s Brief is due.  You will not have to file the Expert’s Report until later in the process – but your Appellant’s Brief should be consistent with the Expert’s Report (position).
  8. The CITT requires the appellant (you) to file an Appellant’s Brief within 60 days after filing your appeal (see Information for Appellants on the CITT website). The Appellant’s brief must contain:

(a) the appellant’s contact information (name, address, telephone number, fax number, email address);

(b) a concise statement of the grounds for the appeal and the important facts relating to each ground;

 – a description of the goods at issue;

– the points at issue between the appellant and the respondent;

– the statutory provisions relied on;

– a short outline of argument to be made at the hearing; and

– the nature of the decision sought from the Tribunal;

(c) copies of any documents that may be useful in explaining or supporting your case and on which you intend to rely; and

(d) copies of any authorities (e.g. case law) that support the appellant’s position.

9. When you file the Appellant’s Brief, you may file a sample of the goods at issue (which the Tribunal calls a “physical exhibit”).  Sometimes a physical exhibit assists the Tribunal in understanding what you are talking about.  Also, filing an exhibit allows the CITT member to ask additional questions to understand what is this good. When you file the Appellant’s Brief, you must send a copy to the CITT by electronic filing or in paper format.  You must also send a copy to the Department of Justice lawyer.

10. The Department of Justice lawyer (who will represent the CBSA), must file a Reply Brief 60 days after the Appellant’s Brief.  Read this Reply Brief when it arrives and look for errors made by the CBSA.

11. If you have an Expert’s Report, it must be filed no later than 20 days before the hearing.  Review Information for Appellants to know what must be in the Expert’s Report.

12. If the CBSA files an Expert’s Report, you may hire your own expert.  An expert is usually someone not in your company who knows a lot about the type of goods at issue.  An expert is not your advocate or lawyer, their role is to assist the CITT.

13. If you cannot travel to Ottawa to attend a hearing, ask the CITT if you can participate in the hearing by teleconference (it is possible);

14. Prepare your evidence and arguments long before the hearing date.  The hearing is your best opportunity to communicate with the CITT; and

15. Hire a customs lawyer on a limited retainer basis (or full retainer) to guide you through the process.  A limited retainer might be to review your appeal form, review your brief and make helpful suggestions as to what evidence to file.

For more information about Canada’s customs laws, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  More information is posted on the LexSage website.

Canada Commences PET Resin Antidumping/Countervailing Duty Injury Inquiry

Posted in Antidumping, Trade Remedies

On November 17, 2017, the Canadian International Trade Tribunal (“CITT”) announced the commencement of the antidumping/countervailing duty injury inquiry in respect of polyethylene terephthalate resin (PET resin) originating in or exported from China, India, Oman, and Pakistan. The Subject Goods are defined as “PET resin having an intrinsic viscosity of at least 0.70 deciliters per gram but not more than 0.88 deciliters per gram, including PET resin that contains various additives introduced in the manufacturing process, as well as blends of virgin PET resin and recycled PET containing 50 percent or more virgin PET resin content by weight.”  This is an input in plastic goods.

The commencement of the injury inquiry followed the November 16, 2017 Canada Border Services Agency (“CBSA”) Notice of Preliminary Determinations of dumping and subsidization imposing AD/CVD margins between 26.1% – 76.7%.  The CBSA Preliminary Determinations are as follows:

Estimated Margins of Dumping, Estimated Amounts of Subsidy and Provisional Duties by Exporter
Country of origin or export Estimated Margin of Dumping Estimated Amount of Subsidy Total Provisional Duties Payable
China
Jiangsu Sanfangxiang Group Co. Ltd. 3.3% 22.8% 26.1%
All other exporters 17.4% 22.8% 40.2%
India
Reliance Industries Limited 34.0% 3.9% 37.9%
All other exporters 45.6% 31.1% 76.7%
Oman
OCTAL SAOC FZC 22.2% 0.50% 22.2%
All other exporters 41.3% 4.0% 45.3%
Pakistan
Novatex Limited 45.6% 0.51% 45.6%
All other exporters 45.6% 2.3% 47.9%

 

What this means is that if the CBSA issues a final determination in 90 days that is similar to the preliminary determination, significant duties will be imposed if the CITT makes an injury finding.  For two companies, the subsidy case may be terminated in the final determination if, during the CBSA verifications, the low subsidy rates are confirmed as accurate. Given the significant duty rates, it is important for exporters and Canadian importers to participate in the CITT injury inquiry if you wish to continue to export to Canada or import from current sources.

CITT Injury Inquiry Schedule

The CITT Injury inquiry schedule is as follows:

  • November 17, 2017 – The CITT posts the Questionnaires CITT’s website and sends the Questionnaires to parties identified by the CITT (including importers identified by CBSA FIRM data and exporters);
  • December 1, 2017 – If you wish to participate in the injury inquiry, you must file a notice of participation and representation (counsel file declarations and undertakings);
  • December 8, 2017 – Replies to all questionnaires must be filed;
  • January 8, 2018 – The CITT distributes exhibits, including the investigation report, to the persons who filed a Notice of Participation (Parties).  If you do not have a representative (such as legal counsel), you can only receive the public documents.  Canadian resident counsel may receive the confidential record if they have filed confidentiality undertakings;
  • January 8 to 16, 2018 – If a party wants another party to provide certain information that may be against the other parties’ interest in the case, they must formulate a Requests for information (RFIs) and the reason why the information is required and file the RFIs with the CITT;
  • January 15, 2018, by noon – Parties who want certain goods excluded from an injury finding must file their Requests for product exclusions;
  • January 16, 2018 by noon – Parties supporting a finding of injury must file their Briefs and Witness Statements (Submissions);
  • January 18, 2018 – Parties which are the subject of RFI requests must file any objections to the RFIs;
  • January 22, 2018, by noon – Domestic Industry files Responses to requests for product exclusions;
  • January 23, 2018 – The CITT issues its decisions on RFIs (that is, they order parties to answer legitimate RFI questions and may ask their own requests for information;
  • January 23, 2018, by noon – Parties opposing a finding of injury must file their Briefs and Witness Statements (Submissions in Opposition);
  • January 31, 2018, by noon – Parties must file their Replies to RFIs;
  • January 29, 2018, by noon – Parties who have requested exclusions must file their Replies to responses to requests for product exclusions;
  • January 30, 2018, by noon – Parties supporting a finding of injury must file their Reply Submissions;
  • February 12, 2018 – The CITT commences the public hearing that may take 1-5 days (can be more than 5 days);
  • March 16, 2018 – CITT issues Order (the CITT let’s you know whether it has made an injury finding or threat of injury finding, granted exclusions or terminated the proceedings in whole or in part); and
  • April 3, 2018 – CITT issues its Statement of Reasons.

We recommend to parties that they diarize these deadlines and block time in their schedules to respond to the CITT as scheduled.  It is important to file a Notice of Participation if you what to watch what is happening in the proceedings.  This does not obligate you to file submissions or appear at the hearing.

If you have any questions, please do not hesitate to contact Cyndee Todgham Cherniak who has appeared on behalf of exporters, foreign producers and importers in many CITT injury inquiries. Cyndee can be reached at 416-307-4168 or at cyndee@lexsage.com.

 

Speak Up!: Canada Is Consulting With Canadians On Cannabis Duties And Taxes

Posted in Canada's Federal Government, cannabis, Cross-border trade, Excise Duty, Excise Tax, Imports Restrictions

On November 10, 2017, Canada’s Department of Finance made an announcement of a one month consultation process concerning the imposition of excise taxes/duties and goods and services tax (“GST”) and harmonized sales tax (“HST”) on cannabis products. Canadian stakeholders, businesses and the public have until December 7, 2017 to submit feedback as part of the Government of Canada’s consultation on the cannabis duty framework and proposed changes to the Excise Tax Act and the Excise Act, 2001 and related regulations. This consultation follows the tabling in the House of Commons of Bill C-45 “Cannabis Act” earlier this year and is an important step in the legalization process — the Government of Canada making money on the legalization of cannabis.

The Department of Finance posted a Proposed Excise Duty Framework, which forms the basis for the consultations. Some of the topics for consultation are:

  • Excise Tax/Duty Base: What is subject to excise tax/duty and GST/HST (e.g., includes any cannabis products sold under the proposed Cannabis Act for medical purposes)?
  • Exemptions from Base: What exemptions from the excise tax/duty base will be legislated (e.g., Any exportation of cannabis for medical or scientific purposes through an authorized permit or licence will not be subject to excise tax/duty)?
  • Excise Tax/Duty Methodology: How will excise taxes/duties will calculated (e.g., ad valorem, flat rate)?
  • Excise Tax/Duty Rates: What amount/rate of excise tax/duty to be charged (e.g., the Department of Finance has proposed excise duty of $1 a gram or 10 per cent of the producer’s sale price of that product, whichever is higher)? – See Cannabis Taxation at a Glance
  • Registration/Licensing: What will be the federal registration/licensing requirements?
  • Conditions: What conditions will be imposed on cultivation, manufacturing and distribution/sale of cannabis?
  • Packaging/Stamping: What will be the packaging/stamping requirements?
  • Coordination: How will the Federal Government and provincial governments coordinate;
  • Reporting: What will be the reporting/filing requirements?
  • GST/HST: The application of GST/HST to excise tax/duty included prices for cannabis?

The Framework also sets out that the import and export of cannabis and cannabis products will be prohibited. There will be exceptions to this general prohibition.  For example:

  • The import and export of cannabis or cannabis products for medical and scientific purposes will continue to be allowed with the proper permits issued by the Government; and
  • The import and export of industrial hemp will continue to be permitted with proper licenses.

It will be important to provide comments before the December 7th deadline.  The Government of Canada has announced that cannabis will be legalized by July 1, 2018.  This means that the excise tax/duty and GST/HST regime for cannabis will need to be finalized within 6 months.

Some issues that might be raised in the consultation process are:

  • Whether medical cannabis should be excluded from the excise tax/duty base?
  • Whether additional exclusions should be granted, such as for medical cannabis prescribed by a medical practitioner or to encourage Canadian research and development of cannabis products and cannabis-related medical devices?
  • What should be the filing and payment requirements?
  • Are there inconsistencies between the proposed legislation and the existing and long-standing GST/HST exemptions in the Excise Tax Act for medical devices and prescription medicines?

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

What is the Canadian International Trade Tribunal?

Posted in Antidumping, Canada's Federal Government, Customs Law, Government Procurement, origin, tariff classification, Trade Remedies, valuation

The Canadian International Trade Tribunal (also known as the “CITT”) is an independent, Canadian quasi-judicial administrative tribunal that adjudicates a variety of international trade cases and matters. The CITT is the place to go to receive a fair, timely, transparent and effective resolution of a trade-related dispute and/or government-mandated inquiry/dispute, provided that the trade-related dispute is within an area of the Tribunal’s jurisdiction.

The types of international trade cases and matters within the CITT’s jurisdiction include:

  • customs valuation appeals;
  • customs origin appeals;
  • tariff classification appeals;
  • appeals of advance customs rulings;
  • excise tax (e.g., levied on certain petroleum products, heavy automobiles and air conditioners designed for automobiles) appeals;
  • reviews of procurement-related issues (mostly involving the Government of Canada) (also known as “bid challenges”);
  • antidumping/countervailing duty preliminary injury inquiries;
  • antidumping/countervailing duty injury inquires;
  • antidumping/countervailing duty interim reviews;
  • antidumping/countervailing duty expiry reviews;
  • antidumping/countervailing duty public interest inquiries;
  • antidumping/countervailing duty circumvention proceeding appeals;
  • appeals of antidumping/countervailing duty rulings;
  • exporter rulings relating imposition of antidumping and countervailing duties;
  • global safeguard inquiries;
  • reviews requested by the Government of Canada related to tariffs, trade and economics; and
  • textile references requests by domestic producers for tariff relief on imported textile inputs for production.

Why Go To The CITT?

You would consider going to the CITT if you wish to undertake any of the following legal steps or accomplish any of the following in order to make your business more competitive:

  • file an appeal of a decision by the Canada Border Services Agency (“CBSA”) to confirm a detailed adjustment statement assessing customs duties based on a tariff classification issue;
  • file an appeal of a decision by the CBSA to confirm a detailed adjustment statement assessing customs duties based on a valuation issue;
  • file an appeal of a decision by the CBSA to confirm a detailed adjustment statement assessing customs duties based on an origin issue;
  • file an appeal of a CBSA advance customs ruling / national customs ruling that you believe is not correct;
  • file an appeal of a decision by the CBSA to confirm a detailed adjustment statement assessing excise taxes;
  • file an appeal of a decision by the CBSA to confirm a detailed adjustment statement assessing antidumping and/or countervailing duties;
  • challenge a Government of Canada decision to not award a government contract to you for reasons that you feel are not fair or are discriminatory;
  • challenge a Government of Canada tender document that you believe is unclear or favours a particular bidder;
  • challenge a Government of Canada decision to sole-source a government contract that you believe is covered by a free trade agreement;
  • participate in an antidumping/countervailing duty preliminary injury inquiry (e.g., to challenge a complaint or seek a ruling on classes of goods);
  • participate in an antidumping/countervailing duty injury inquiry (e.g., to provide evidence to the CITT that the domestic industry is not injured by imports);
  • participate in an antidumping/countervailing duty expiry review inquiry (after antidumpnig duties/countervailing duties have been in place for 5 years);
  • ask the CITT to grant a product exclusion in an antidumping/countervailing duty inquiry to exclude certain goods from an antidumping/countervailing duty order;
  • seek a product exclusion by way of an interim review when it is clear that the domestic industry does not manufacture goods that you wish to import (so that the goods are no longer subject to antidumping/countervailing duties);
  • ask the CITT to rescind an antidumping/countervailing duty order when the domestic industry stops production in Canada (by way of an interim review);
  • ask the CITT to issue an importer ruling;
  • ask the CITT to conduct a safeguard inquiry because imports are causing serious injury to domestic production; and
  • request (by a domestic textile and/or apparel producer) tariff relief on imported textile inputs for production.

Some of these types of trade-related disputes are complex and some are straight-forward. Some of the issues involve significant dollars and some of the disputes may involve a very small amount of money (e.g., a small assessment of customs duties). Resolution of some of the issues may be strategically important to your business.  Sometimes, Canadian businesses need an issue resolved for certainty. Big and small may come to the CITT for redress and resolution.

The CITT is known as an “administrative tribunal”.  The CITT is like a court, but is not a court. What this means is that the CITT members (what the judges are called) may proactively ask questions of the parties.  The CITT members do not necessarily limit their reviews to the issues raised by the parties.  The CITT may not be able to award costs (e.g., if you are successful in your customs and antidumping appeal).

The CITT’s jurisdiction is limited by the Canadian International Trade Tribunal Act, which sets out the powers of the CITT.  The CITT’s powers may be further limited by laws such as the Customs Act, Special Import Measures Act and the Excise Tax Act (which are the primary statutes referring matters to the CITT as the decision-maker).

The procedural rules that parties follow when they appear before the CITT are found the Canadian International Trade Tribunal RulesDepending on the type of proceeding, you may have to refer to the Canadian International Trade Tribunal Regulations (safeguard inquiries) or the Canadian International Trade Tribunal Procurement Inquiry Regulations (bid challenges) or another regulation, such as the Special Import Measures Regulations (antidumping/countervailing duties).

The Canadian International Trade Tribunal (CITT) is the bid challenge authority for Canada for the North American Free Trade Agreement (NAFTA)Canada-European Union Comprehensive Economic and Trade Agreement (CETA)World Trade Organization Agreement on Government Procurement (WTO-AGP)Canada – Chile Free Trade Agreement (CCFTA)Canada – Peru Free Trade Agreement (CPFTA)Canadian Free Trade Agreement and Agreement on Internal Trade (AIT).

The CITT is taking positive steps to become more accessible to Canadian businesses, including SMEs and SMBs.  For example, the CITT has developed a process to permit parties to provide testimony by way of teleconferencing (as opposed to requiring a trip to Ottawa).  The CITT has posted guidance on their web-sites, such as:

The CITT is located in Ottawa, Ontario, Canada and conducts most hearings in the two hearing rooms in Ottawa.  Sometimes the CITT conducts hearings in other major Canadian cities (e.g., Vancouver, Edmonton, etc.).

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

What is the CPTPP?

Posted in Canada's Federal Government, TPP-1, Trade Agreeements, Uncategorized

On November 10, 2017, the TransPacific Partnership Agreement (-1) was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”).  Canada made an announcement about the CPTPP and the new name was used.  Canada’s announcement was made prior to the release of the Joint Statement.

The CPTPP parties are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.  The United States withdrew from TPP on January 23, 2017.

More information about the CPTPP is contained in a statement by the Australian Government (which essentially reproduces the Joint Statement and provides PDFs of the Annexes).  It appears that the CPTPP is almost complete and only a few issues remain.  According to the statement:

  1. The CPTPP Parties renamed the agreement;
  2. The CPTPP Parties reaffirmed the balanced outcome and the strategic and economic significance of the TPP Agreement signed in Auckland on 4 February 2016;
  3. The CPTPP Parties have agreed on the core elements of the CPTPP;
  4. The CPTPP Parties agreed to Annex I (Outline of the Agreement) and Annex 2 (List of Suspended Provisions);
  5. The CPTPP incorporates provisions of the TPP, with the exception of a limited set of provisions which will be suspended;
  6. The CPTPP text also incorporates a list of four specific items for which substantial progress was made but consensus must be achieved prior to signing;
  7. The CPTPP Parties agreed that all the TPP‎ side letters signed among the 11 countries will be maintained in principle, unless the relevant Parties decide otherwise;
  8. The CPTPP Parties affirmed the right of each Party to preserve, develop, and implement its cultural policies;
  9. The CPTPP Parties agree that the CPTPP maintains the high standards, overall balance, and integrity of the TPP while ensuring the commercial and other interests of all participants and preserving our inherent right to regulate, including the flexibility of the Parties to set legislative and regulatory priorities;
  10. The CPTPP Parties share the view that Article 6 of the CPTPP permits review that may extend to proposals to amend the CPTPP, to reflect the circumstances‎ concerning the status of the TPP;
  11. The Ministers tasked officials to continue their technical work, including continuing their efforts toward finalising those items for which consensus has not yet been achieved, and legal verification of the English text and translation, to prepare finalised text for signature; and
  12. The CPTPP Parties may engage in domestic consultation processes with respect to the CPTPP.

Annex 2 sets out (at the end) the four areas still under negotiation:

  1. State-owned enterprises (Annex IV Malaysia);
  2. Services and Investment Non-Conforming Measures (Annex II – Brunei Darusasalam – 14 Coal, paragraph 3);
  3. Dispute Settlement (trade sanctions) – Article 28.20 (Vietnam); and
  4. Cultural Exception (Canada).

Interestingly, and despite news reports to the contrary, it does not appear that autos is an outstanding issue.

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

Are You Asking The Right Questions When You Travel With Electronic Devices?

Posted in Border Security, Canada's Federal Government, Corporate Counsel

 

Technology is wonderful. Laptop computers are getting lighter.  Storage capacity on laptop computers, smart phones, USB keys and other electronic devices are up in the terabytes.   You can travel with your electronic devices and no one will know you are not in the office.

What this means is that we can travel with vast amounts of personal data (and client documents) dating back to (or before) the purchase of an electronic device.  From one electronic device, you (or the Canada Border Services Agency (“CBSA”), U.S. Customs and Border Protection (“US CBP”) and other border officers) can access every email, text message, document, bank statement, health report, credit card statement, invoice, photo, contact, calendar entry, call history, voicemail message, to-do notation, book, magazine, internet search, app data, Facebook post, Twitter post, Netflix download history, stored password, and other information stored on your electronic device.  If your electronic device has GPS, the geo-locations of your travels can be downloaded. Your electronic device may be cloud enabled and may synchronize with or open the door to data stored elsewhere (that is not on the electronic device with which you are travelling). Certain deleted data can be retrieved with relative ease.

A single handheld electronic device or laptop can store more than what used to be in luggage.  The Customs Act is outdated and has not been modernized to reflect modern technology. Law-abiding citizens do not even think about the information on their electronic devices until the CBSA asks you to write your password down on a piece of paper and they disappear with your electronic device into a back room without you. As the CBSA officer walks away with all of your personal information, you finally ask the important question, “Can he/she do that”?  And then the door shuts and you have no opportunity to stop the intrusive and invasive search of your electronic device.

Ask the right questions:

  1. What is the CBSA’s policy concerning examinations of electronic devices? Is there one?  The answer is “yes”, there is a policy that has not been posted on the CBSA website.  However, LexSage Professional Corporation has posted Operational Bulletin PRG-2015-31 on its website.
  2. What is the CBSA’s policy concerning examinations of solicitor-client privilege materials? Is there one?  The answer is “yes”, there is a short policy that has not been posted on the CBSA website.  However, LexSage Professional Corporation has posted Operational Bulletin PRG-2014-07 on its website.
  3. Will the CBSA respect solicitor-client privilege? The answer is “maybe”.  Some within the CBSA believe that Operational Bulletin PRG-2014-07 is only a guideline and that individual CBSA officers can choose not to follow the suggestions.  Also, Operational Bulletin PRG-2014-07 states that “only documents … marked “Solicitor/Client Privilege” or are addressed to/from a law firm, or a lawyer’s office, or where the documents are carried by a lawyer or notary in physical or electronic format and solicitor-client privilege is claimed or asserted … are potentially privileged.”  The CBSA officer adjudicates whether privilege applies.
  4. Is there a procedure to have someone else review solicitor-client privileged documents? The answer is “yes”, but you will have to deposit your electronic device in a sealed evidence bag and leave your electronic device with the CBSA for an indefinite period of time. Operational Bulletin PRG-2014-07 does not set out the procedure.  The procedure is contained in the CBSA Enforcement Manual, Part 4, Chapter 3, paragraph 96 (also posted on the LexSage website).  There must be another CBSA officer to observe the process and sign a completed IMM 5242B form and the electronic device must be placed in a sealed evidence bag.
  5. Should the CBSA access emails and texts that arrive while the CBSA is examining your smart phone or laptop? The answer is “no”. Operational Bulletin PRG-2015-31 requires that the CBSA set your electronic device to “airplane mode”.
  6. Should the CBSA ask for the password to webmail or to access documents stored in the cloud? The answer is that the CBSA should only examine goods in your possession at the time you cross the border. But, what happens at the border may be different than what is in the bulletin.
  7. Should the CBSA ask you to access bank records and credit card statements by going into websites? The answer is “no”. The answer is that the CBSA should only examine goods in your possession at the time you cross the border. But, what happens at the border may be different than what is in the bulletin.
  8. Should the CBSA look at your photos? The answer is that it all depends on what they are looking for. If the CBSA thinks you have child pornography on your phone or computers, they do have authority to look for prohibited materials.  However, the CBSA should not go on a fishing expedition through your intimate and personal information.
  9. Does the CBSA need to have reasonable suspicion before examining an electronic device. The answer is that currently the CBSA just asks to examine the device and does not have to state the reason for asking or state what they will they be looking for. The threshold for such examinations is significantly lower than what the police require to obtain a search warrant.  The CBSA does not need a search warrant to examine your electronic device.
  10. Do you have to give the CBSA your password? Martin Bolduc, VP Programs Branch of the CBSA, testified before the House of Commons, Standing Committee on Access to Information, Privacy and Ethics (“ETHI”) on September 27, 2017 that the CBSA may arrest a person who does not provide a password when requested.  The CBSA’s position is that section 13 of the Customs Act requires that a traveler answer all questions and, therefore if the CBSA officer asks for a password, it must be provided.

There is not a lot of case law on searches of electronic devices by the CBSA.  What we know is that paragraph 99(1)(a) of the Customs Act grants CBSA officers the authority to examine goods.  Goods is defined in subsection 2(1) of the Customs Act to include luggage and “any document in any form”. While the CBSA interprets the word “document” to include an electronic document, electronic information in or accessible through an electronic device is another matter altogether.

On June 8, 2017, the Privacy Commissioner, Daniel Therrien wrote to House of Commons Standing Committee on Public Safety and National Security and made the following observations in the context on Bill C-23 relating to pre-clearance:

“The fundamental problems with groundless searches of electronic devices is that these searches do not recognize that they are extremely privacy intrusive.  Yet, Bill C-23 recognizes the sensitivity of other searches, namely searches of persons, from the relatively un-intrusive frisk or pat down searches to the more intrusive strip and body cavity searches.  These searches legally cannot be performed unless an officer has reasonable grounds to suspect some legal contravention, notably the concealment of goods.  In my view, it is extremely clear that searches of electronic devices can contain the most personal and intimate information we hold … The idea that electronic devices should be considered as mere goods and therefore subject to border searches without legal grounds is clearly outdated and does not reflect the realities of modern technology.  Border controls are important and legitimate for reasons of sovereignty and public safety, but they should not be exercised arbitrarily.”

On September 27, 2017, the Canadian Bar Association (including myself and David Fraser as witnesses) presented a submission and appeared before the ETHI Standing Committee and raised concerns about the CBSA’s policies on examinations of electronic devices. The CBA raised these same concerns.  The Submissions of the CBA raised the following points:

  1. Any interpretation of the Customs Act that would authorize a warrantless search of data stored on an electronic device or accessed from an electronic device or require an individual to disclose a password to access it may be unconstitutional.
  2. The Supreme Court of Canada has modified the common law in response to technological change.
  3. There is a very high expectation of privacy in the contents of electronic devices. (R. v. Fearon, 2014 SCC 77)
  4. In R. v. Vu, the Supreme Court of Canada found that a search with a warrant had to exclude a computer found on those premises because of the acute privacy interests engaged by these devices. Therefore, electronic devices require special rules.
  5. The Supreme Court of Canada has said that solicitor-client privilege is fundamental to the proper functioning of the Canadian legal system. (Blood Tribe Department of Health v. Attorney General of Canada et. Al, [2008] 2 S.C.R. 574.
  6. The Supreme Court of Canada has repeatedly emphasized that solicitor-client privilege must remain “as close to absolute as possible and should not be interfered with unless absolutely necessary”. (Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53)
  7. The Customs Act should be updated to reflect modern Canadian views on our advancing technologies and it is time for Parliament to weigh in.
  8. Only Canadian courts can adjudicate solicitor-client privilege claims. The CBSA is an administrative government body / an enforcer. They do not have the authority to decide what is and what is not covered by solicitor-client privilege.

In his testimony to the EHTI Committee on September 27, 2017, Mr. Bolduc was very clear, the CBSA takes the position they have the authority to look at anything you have on your electronic devices.  If you do not want the CBSA to look at specific information, do not have it on your electronic devices.  So, ask the right questions before you travel with your electronic devices.

For more information about the CBSA’s examination powers and solicitor-client privilege, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  Other useful documents are posted on the LexSage web-site.  The best place to look on the LexSage website is under Customs articles and University of Windsor course materials “NEXUS/Border Infractions“.

Other helpful articles include:

Can the Canada Border Services Agency Search Electronic Devices?

Is the CBSA Required to Respect Solicitor-Client Privilege at the Canadian Border?

On What Authority Does The CBSA Search Smart Phones?

Canadian Legal Provisions Applicable to Laptop and PDA Examinations at the Border

Canada Lists Names: Canada Publishes 3 Magnitsky Sanctions Lists

Posted in Aerospace & Defence, Canada's Federal Government, Cross-border deals, Cross-border trade, Export Controls & Economic Sanctions, Exports, FCPA/Anti-Corruption, Legal Developments, Proceeds of Crime/Money Laundering

On November 3, 2017, Canada announced sanctions and published three lists of names under the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (a.k.a Canada’s Magnitsky Act) imposing sanctions against 52 individuals from Russian, Venezuela and South Sudan.  The Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) received Royal Assent on October 18, 2017.

The Magnitsky-type sanctions against gross human rights abusers and corrupt foreign officials are currently prepared on a country-by-country basis as “Cases”.  Canadian companies should review each list to ensure that they do not engage in prohibited activities with the named individuals.  The three lists are:

The lists of names on the Magnitsky sanctions lists are not the same as the lists of listed persons under the Special Economic Measures Act:

The inconsistencies can be confusing.  To simplify matters, persons in Canada and Canadians outside Canada must abide by all Canadian economic sanctions laws.  If a person is not on one list and is on another list, the dealings with that person are restricted.  It is important to determine the laws that apply and the restrictions and sanctions imposed under each law.  Persons in Canada and Canadians outside Canada cannot engage in the prohibited activity (ies) unless the Minister of Foreign Affairs issues a ministerial Authorization or permit.

As a result, it is very important to check each of the above lists and the lists below to ensure that none of the individuals or entities involved in a proposed transaction is a designated or listed person under Canadian economic sanctions laws:

Many Canadian companies (especially small and medium sized businesses) do not know what they should do or how they should start implementing the economic sanctions, trade restrictions and asset freezes. It is important to know what you are not allowed to do:

Pursuant to the Regulations under the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), persons in Canada and Canadian-incorporated entities and Canadian citizens outside Canada are prohibited from:

  • Dealing, directly or indirectly, in any property of a designated foreign national
  • Entering into or facilitating, directly or indirectly, of any financial transaction related to a dealing in property of a designated foreign national
  • Providing financial services or any other services to, for the benefit of, or on the direction or order of, a designated foreign national
  • Acquiring financial services or any other services for the benefit of, or on the direction or order of, a designated foreign national
  • Making available any property to a designated foreign national or to a person acting on his or her behalf.

The above prohibitions may be waived by the Minister of Foreign Affairs by way of permit issued under the Justice for Victims of Corrupt Foreign Officials Permit Authorization Order.

We have put together a short list of recommendations of due diligence steps that Canadian companies should undertake (which does not cover every step required):

  1. Review the applicable legislation and regulations in order to become familiar with the prohibited activities – each law and/or regulation may impose different forms of prohibitions or restrictions;
  2. Arrange an internal meeting and bring together of team of people within your organization to implement the required changes to your business activities necessary to implement the economic sanctions, trade restrictions and asset freezes. For example, bring is the person in charge of compliance, head of the sales department, the head of the purchasing department, legal department, someone for risk assessment and someone from human resources.  You may also wish to include someone from your IT department if computerized systems will need to be updated.
  3. Review the computer systems to determine if your sell any goods or services or provide technical data to the sanctioned country.  Yes, the economic sanctions, trade restrictions and asset freezes are against individuals – but all the individuals are from a particular country or are associated with a particular country.  Printout any list of names that you find as connected with the countries subject to the new sanctions.
  4. Check the list of names against the new list of designated persons and names in your system that closely resemble the names of designated persons – it is common for Canadian companies to misspell foreign names. Remove any names that are dissimilar from the list of designated persons and keep a list of matching and similar names (“Matched/Similar List of Names”).
  5. Review your customer lists for the Matched/Similar List of Names.  Take steps to stop doing business if you match a name to the designated persons list or a similar name. Inform the head of sales and the sales persons connected with the account that they can participate in no further business with the Matched/Similar Name.  However, be prepared to review any challenges by persons with the same or similar names.
  6. With respect to corporations who are customers/clients, check your records for a list of shareholders, directors, senior management, etc. Check the names of shareholders, directors and senior management against the new list of designated persons and identify names in your system that are the same as or closely resemble the names of designated persons. Take steps to stop doing business if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  7. With respect to partnerships who are customers/clients, check your records for a list of partners. Check the names of partners against the new list of designated persons and identify names in your system that are the same as or closely resemble the names of designated persons. Take steps to stop doing business if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  8. With respect to trusts who are customers/clients, check your records for a list of settlors and beneficiaries. Check the names of settlors and beneficiaries against the new list of designated persons and identify names in your system that are the same as or closely resemble the names of designated persons. Take steps to stop doing business if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  9. Check open purchase orders relating to the List of Names and any corporations, partnerships or trusts connected with the designated individuals (the “Expanded List of Names”). Check the new list of designated persons against the Expanded List of Names. Take steps to terminate the purchase order (that is not ship the goods or technical data or provide the services) if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  10. Check existing contracts relating to the Expanded List of Names. Check the new list of designated persons against the Expanded List of Names. Take steps to stop further activities under that contract if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  11. Check letters of credit and any financial arrangement relating to the Expanded List of Names. Check the new list of designated persons against the Expanded List of Names. Take steps to stop further issuance or credit or other financial dealing if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  12. If you hold property for clients (e.g., you are an investment portfolio manager), check for assets belonging to persons in the Expanded List of Names. Take steps to stop any transfer of property to that individual, corporation, partnership or trust if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  13. Condominium corporations and real property management companies should for assets belonging to persons in the Expanded List of Names. Take steps to stop any transfer of property to that individual, corporation, partnership or trust if you match a name to the designated persons list.  However, be prepared to review any challenges by persons with the same or similar names.
  14. If the designed persons are found in your computer systems (including corporations, partnerships and trusts associated with the designated persons), update for systems to flag those persons (and persons with similar names) so that you do not conduct any future business with those designated persons and that you freeze any existing assets.
  15. If the designed persons are not found in your computer systems (including corporations, partnerships and trusts associated with the designated persons), update for systems to flag designated persons (and persons with similar names) so that you do not conduct any business with any designated persons.
  16. Inform employees, agents, representatives, etc. that if they continue to do business with a designated person, they could cause the company to be subject to severe penalties and they may be subject to severe penalties under Canadian law.  Inform them that circumventing the sanctions could lead to their termination with the company. Opening a new account in the name of a person not of the designated persons list in order to circumvent the computerized checks and balances should led to termination with cause.
  17. Update your End Use Certificates precedent. If you do not currently use End Use Certificates, consider implementing a process to require end-use certificates for transactions with persons in sanctioned countries.
  18. Update your Compliance Policies. If you do not currently do not have a Compliance Policy, consider preparing a Compliance Policy covering economic sanctions, export controls, trade restrictions and asset freezes.
  19. Update any online training or in-person training you provide to employees, agents, representatives or schedule a training session with employees, agents and representatives. If you do not currently do not have a training program, consider preparing a training program covering Canadian laws.
  20. If you have subsidiaries located in foreign jurisdictions (and in particular the region of the new sanctioned country), determine to what extent they are required to implement the new list of designated persons and repeat the above listed steps for each subsidiary.
  21. If this is all too much for you or you do not know how to get started, call a lawyer who knowledgeable about economic sanctions and internal compliance.

For more information or to arrange an export controls diagnostic, please contact Cyndee Todgham Cherniak at 416-307-4168 or at Cyndee@LexSage.com. If you would like assistance in managing the process, Heather Innes, formerly in-house counsel at a company with export controls processes, would be happy to assist. Please call Heather at 416-350-1234.

Canada’s Magnitsky Act Receives Royal Assent

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

Today, at 1PM, Canada’s Magnitsky Act (known as Bill S-226 Bill S-226 “An Act to provide for the taking of restrictive measures in respect of foreign nationals responsible for gross violations of internationally recognized human rights and to make related amendments to the Special Economic Measures Act and the Immigration and Refugee Protection Act” (officially known as the “Justice for Victims of Corrupt Foreign Officials Act”) received Royal Assent.  It is the law in Canada.  It is expected that a regulation will be published shortly with a list of names of persons sanctioned under Canada’s Magnitsky Act.

Canada Publishes A Consolidated SEMA Sanctions List

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

On October 12, 2017, Global Affairs Canada published a Consolidated Special Economic Measures Act Sanctions List.  Before today, Canadian companies had to review each regulation promulgated under the Special Economic Measures Act when conducting due diligence.  However, and this is important, the Global Affairs Consolidated Special Economic Measures Act Sanctions List does not include sanctions under the United Nations Act.  As  result, it is still necessary to review each regulation promulgated under the United Nations Act.

The Consolidated SEMA Sanctions List was last updated on October 7th.  The Venezuela SEMA sanctions are included.  However, if the Consolidated SEMA Sanctions List is not updated when new SEMA sanctions are imposed, the list will not be useful for very long.

The Consolidated SEMA List has been requested by Canada’s economic sanctions lawyers for years (but we asked for all economic sanctions lists to be consolidated into a user-friendly list).  In April 2017, the House of Commons Standing Committee on Foreign Affairs and International Development (FAAE) issued a report entitled “A Coherent and Effective Approach: Canada’s Economic Sanctions Regimes: Sergei Magnitsky and Beyond” in which it recommended the following:

“The Government of Canada should produce and maintain a comprehensive, public and easily accessible list of all individuals and entities targeted by Canadian sanctions containing all information necessary to assist with the proper identification of those listed.”
On July 17, 2017, the Minister of Foreign Affairs responded in a letter and indicated that the recommendation would be implemented with respect to the SEMA sanctions.  Today’s list is what was promised.
For more information about Canada’s economic sanctions laws or to arrange for a diagnostic of your compliance program, please contact Cyndee Todgham Cherniak at 416-307-4168 or at Cyndee@LexSage.com. If you would like assistance in managing the process, Heather Innes, formerly in-house counsel at a company with export controls processes, would be happy to assist. Please call Heather at 416-350-1234.