The Canadian International Trade Tribunal (“CITT”) has changed their website and have added a page listing all the target dates for expiry reviews (5 year sunset reviews) of existing antidumping and countervailing duty orders.

This is helpful to importers and foreign producers because Canada made changes to the Special Import Measures Act a few years ago.  It used to be easy to determine when the CITT Decision in an expiry review case would be issued – it was five years minus one day from the date of the CITT order in the original inquiry or last expiry review.

Now, the CITT LE decision is issued five years minus one day from the date of the CITT order in the original inquiry or last expiry review. In an LE proceeding, the CITT asks whether an expiry review is warranted.  Importers and foreign producers are will be aided by the CITT schedule of dates, which is as follows:

Measure Expiry Date Latest Possible Date of Notice of Expiry Tentative Date of Notice of Expiry
Fasteners 5 January 2020 5 November 2019 September 6, 2019
Concrete reinforcing bar 1 9 January 2020 8 November 2019 October 18, 2019
Steel plate 6 30 January 2020 29 November 2019 November 29, 2019
Oil country tubular goods 1 2 March 2020 2 January 2020 December 20, 2019
Oil country tubular goods 2 2 April 2020 31 January 2020 January 31, 2020
Photovoltaic modules 3 July 2020 1 May 2020  
Whole potatoes 9 September 2020 9 July 2020  
Refined sugar 30 October 2020 28 August 2020  
Steel line pipe 29 March 2021 29 January 2021  
Steel grating 18 April 2021 18 February 2021  
Fat hot-rolled steel sheet and strips 12 August 2021 11 June 2021  
Large line pipe 20 October 2021 20 August 2021  
Copper pipe fittings 28 November 2021 28 September 2021  
Gypsum board 4 January 2022 4 November 2021  
Pup Joints 7 April 2022 7 February 2022  
Concrete reinforcing bar 2 3 May 2022 3 March 2022
Fabricated industrial steel components 25 May 2022 25 March 2022
Line Pipe 4 January 2023 4 November 2022
Stainless Steel Sinks 8 February 2023 8 December 2022
Copper Pipe Fittings 25 May 2023 25 March 2023
Liquid Dielectric Transformers 1 June 2023 1 April 2023
Piling Pipe 4 July 2023 4 May 2023
Pasta 26 July 2023 26 May 2023
Steel Plate 3 9 August 2023 9 June 2023
Carbon Steel Welded Pipe 2 15 October 2023 15 August 2023
Seamless Casing 28 November 2023 28 September 2023

Please note that the CITT may amend these dates – so, please check the CITT website.

If you require information about Canada’s expiry review process, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.

On August 15, 2019, the Canada-United States Preclearance Agreement (officially known as the Agreement on Land, Rail, Marine and Air Transport Preclearance between the Government of Canada and the Government of the United States of America) entered into effect. The Canada-United States Preclearance Agreement was signed on March 16, 2015.

Global Affairs Canada announced “New Canada-U.S. Preclearance Agreement comes into force, opening the door to enhanced travel and trade“.  The Canada-United States Pre-Clearance Agreement allows for preclearance of goods and people.

Canada had completed all the steps to implement the Canada-United States Pre-Clearance Agreement. On June 17, 2016, the Minister of Public Safety and Emergency Preparedness introduced Bill C-23 “an Act respecting the preclearance of persons and goods in Canada and the United States” (to be known as the “Preclearance Act 2016″) in the House of Commons. Bill C-23 received Royal Assent on December 12, 2017.

This Agreement is a component of the Beyond the Border Action Plan that was announced in February 2011. The Agreement was previously tabled in the House of Commons on April 22, 2015 by the Harper Government. So, this is not a new initiative.

The main purpose of the Agreement and Bill C-23 is to facilitate and expedite travel between Canada and the United States for goods and services. Canada and the United States have one of the most important trading relationships in the World. As a result, mechanisms such as preclearance, make a lot of common sense.

Part 1 of Bill C-23 addresses the performance of U.S. preclearance officers in Canada. Part 1 of Bill C-23 authorizes United States customs officers to conduct preclearance in Canada of travellers and goods bound for the United States. Bill C-23 also authorizes a federal Minister to designate preclearance areas and preclearance perimeters in Canada, in which preclearance may take place. Bill C-23 gives United States preclearance officers powers to facilitate preclearance.

The exercise of any power and performance of any duty or function by a United States preclearance officer is subject to Canadian law, including the Canadian Charter of Rights and Freedoms, the Canadian Bill of Rights and the Canadian Human Rights Act. Canadian police officers and the officers of the Canada Border Services Agency are authorized to assist United States preclearance officers in the exercise of their powers and performance of their duties and functions.  Bill C-23 allows a traveller bound for the United States to withdraw from the preclearance process, unless the traveller is detained under Part 1.  Bill C-23 limits the ability to request the extradition or provisional arrest of a current or former United States preclearance officer.

Part 2 of Bill C-23 addresses the performance of Canadian preclearance officers in the United States. Bill C-23 specifies how the Immigration and Refugee Protection Act will apply to travellers bound for Canada who are in preclearance areas and preclearance perimeters in the United States, and extends the application of other Canadian legislation that relates to the entry of persons and importation of goods into Canada to those preclearance areas and preclearance perimeters. Bill C-23 allows a traveller bound for Canada to withdraw from the preclearance process, unless the traveller is detained.

Part 3 of Bill C-23 contains amendments to the Criminal Code.

Part 4 of Bill C-23 amends the Customs Act.

Preclearance allows the inspection of goods and people before they leave the country of exit. A preclearance inspection at a point of embarkment is essentially the same inspection an individual would undergo at a U.S. port of entry (or at a point of disembarkment) and preclearance travellers do not have to undergo a second U.S. Customs and Border Protection inspection upon arrival in the United States.  Preclearance of goods occurs away from the border prior to the export from Canada and is also the same inspection goods would undergo at a U.S. port of entry and precleared goods do not have to undergo a second U.S. Customs and Border Protection inspection upon arrival in the United States. 

Many travellers from Canada are familiar with preclearance at airports, such as Toronto Pearson International Airport, Calgary Airport, Montreal Trudeau Airport, Vancouver Airport, etc. At previously approved preclearance airports, all travelers go through U.S. Customs Preclearance before boarding flights destined for a location in the U.S.  Inadmissible travelers are not permitted to board their planes and do not enter the United States.  High risk passengers are screened before being allowed to proceed.  Goods are also x-rayed to identify risks.

This preclearance will be expanded to other airports and land/rail/marine locations.  For example, preclearance will be available at a number of new Canadian locations, including Quebec’s Jean Lesage International Airport, Toronto’s Billy Bishop City Airport, Montreal Central Station and the Rocky Mountaineer.

Preclearance is good for Canadian businesses because preclearance strengthens economic competitiveness and mutual security, and expedites the export and import of goods. In principle, the expansion of preclearance should increase the flow of trade between Canada and the United States in both directions.

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

Direct sellers (also known as network sellers) enter the lucrative Canadian market, often without asking questions about whether there are any Canadian laws they should know about. Canadians sign up as independent sales contractors and start to build their sales networks before all questions are asked and answers are received about compliance with Canadian laws.  As a result, many direct sellers have not set up their computerized systems to comply with Canadian laws.  Often business in Canada increases exponentially and compliance with Canadian laws is not addressed before audits commence.

We cannot cover all Canadian laws in this article. We are covering the tops 10 issues that we see on a regular basis when dealing with direct selling companies.  Direct sellers should take steps to comply with Canadian laws before they are selected for an audit.  Here are some of the areas of Canadian law to address:

  1. Provincial licenses: Most Canadian provinces require direct selling companies obtain a provincial license to engage in direct selling to consumers.  Here are some of the links: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland/Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, Saskatchewan, Nunavut.
  2. Health Canada approvals for products: Many products require Health Canada approval before they can be shipped to Canada. Depending on the product, different approvals may be required.  With respect to cosmetics, manufacturers and/or importers must complete a Cosmetic Notification Form for each cosmetic product before offering cosmetics for sale in Canada. With respect to natural health products, manufacturers and importers must obtain a Health Canada license for each product. If approvals have not been obtained, the Canada Border Services Agency (“CBSA”) may detain the goods at the border and prevent future shipments by creating a lookout.
  3. Safe Foods for Canadians Act: If an item shipped to Canada is considered to be food, restrictions in the Safe Foods for Canadians Act may apply. There are restrictions on non-resident importers importing food into Canada for sale to consumers. See Do food import businesses need an import license to import foreign food into Canada?
  4. Goods and Services Tax (“GST”)/Harmonized Sales Tax (“HST”): If sales will be made in Canada, it will be necessary to register for Canada’s federal sales tax, the goods and services tax.  The provinces of Ontario, New Brunswick, Nova Scotia, Newfoundland/Labrador and Prince Edward Island have harmonized their sales taxes with the federal GST.  The direct seller will have to address many GST/HST issues, including: collecting the correct amount of GST/HST on invoices, filing GST/HST returns and remitting GST/HST collected from consumers, claiming input tax credits and determining whether it is possible to become an approved network seller to use an Alternative Calculation Method relating to commissions paid to independent sales contractors.
  5. Provincial Sales Taxes: If sales will be made in the provinces of British Columbia, Saskatchewan, Alberta or Quebec, it will be necessary to register to collect sales taxes in those provinces.
  6. Decide who will be the importer of record if goods are shipped into Canada:  This is an important decision.  If goods are shipped direct to consumers, the consumer will be the importer of record.  If the direct selling company is the importer of record, the company will have to obtain a importer number.  Depending on which option is selected, there will be a number of other issues to consider.
  7. Tariff Classification: When goods are shipped to Canada, even if shipped directly to a consumer, the correct Canadian tariff classification number must be provided to the CBSA.  Based on our experience, insufficient time is spent determining the HS tariff classification number for goods shipped to Canada.  Customs brokers do not always ask questions about the goods resulting in the incorrect tariff classification being used.
  8. Origin: When goods are shipped to Canada, even if shipped directly to a consumer, the correct origin of the goods must be provided to the CBSA.   Just because the goods are shipped from the United States does not mean the origin of the goods is the United States.  Often an analysis must be undertaken to determine the correct origin of the goods.
  9. Valuation:  When goods are shipped to Canada, it is necessary to report to the CBSA the value of each good.  The CBSA is actively auditing direct selling businesses because errors are common when Canadian customs laws have not been reviewed prior to starting to sell into Canada.  Often the manufacturer incorrectly uses the cost of the goods as the value for customs duties. The reason is that the direct seller does not want to limit sales opportunities in Canada because duties and taxes at the border add to the ultimate price paid by consumers.  Providing the incorrect value to the CBSA can lead to large assessments of customs duties. The CBSA could assess the consumer if the consumer is the importer of record – and this would be bad for future business.  The correct valuation method will depend on how Canadian sales are structured.  Valuation issues also arise with respect to replacement goods.
  10. Labeling: Labels on goods sold into Canada may require both French and English on the labels.

If you would like to discuss the Canadian legal requirements for direct sellers, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.

On August 15, 2019, USTR issued a pre-publication version of the Federal Register in which the formal announcement regarding China 301 Tariffs List 4A/B will be made. In that notice, USTR clarified the September 1, 2019 effective date refers to the date of entry or withdrawal for consumption for the goods on List 4A/Annex A. Similarly, for List 4B/Annex C, the December 15, 2019 effective date is also based on the date of entry or withdrawal for consumption.  Oddly, the Federal Register notice also includes Annexes B and D which are intended for “informational purposes” only, with Annex B providing information regarding the goods on Annex A, and Annex D serving the same function for goods on Annex C.

See https://ustr.gov/sites/default/files/enforcement/301Investigations/Notice_of_Modification_%28List_4A_and_List_4B%29.pdf for the announcement.

Originally published by the Journal of Commerce in August 2019

Much has been said recently in the general press about the latest round of tariffs and what did or did not prompt President Trump to decide that August 1st was the right time to impose an additional 10% on the goods from China on the final version of List 4A/B.  Regardless of the reason (s), this additional tariff will take effect on September 1, and companies are once again forced to adapt. Just about every trade lawyer is providing the same list of options for companies to consider – and there really aren’t many and none of them are particularly good. The current situation feels very much like the scene in a boxing movie where the two heavyweight fighters stand in the middle of the ring looking like they are trying to beat the crap out of each other, but whatever blows are landed seem to be without any inkling either is doing real damage to the other, beyond wearing each other out!

What makes the current turn of events interesting is the choice of words on both sides. U.S. negotiators went to Shanghai and met for a relatively brief period of time with their Chinese counterparts. Shortly after their return home, the Trump Administration took language from a press release by the People’s Bank of China (“PBC”), shouted Eureka! and then claimed China admitted to being a currency manipulator.   The relevant press release can be found here: http://www.safe.gov.cn/en/2019/0805/1541.html. The language in question is found at the very end: “The PBC is fully equipped with the experiences and the capacity to support smooth operation of the foreign exchange market, and keep the RMB exchange rate basically stable at an equilibrium and adaptive level.”

Upon reading this, which was obviously a convenient trigger, Treasury Secretary Stephen Mnuchin invoked Section 3004 of the Omnibus Trade and Competitiveness Action of 1988, stating it required him to “‘consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.’ Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator.’ As a result, Secretary Mnuchin now turns to the International Monetary Fund ‘for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments adjustments and to eliminate the unfair advantage.'”

The PBC responded: “’This fluctuation is driven and determined by the market…” [according to Governor Yi.]  ‘Whether it is from the fundamentals of the Chinese economy or from the balance of market supply and demand, the current RMB exchange rate is at an appropriate level. Although the RMB exchange rate has fluctuated due to recent external uncertainties, I am confident that the RMB will continue to be a strong currency,’ Yi said'”. This press story goes on to quote the Chinese central bank as linking the RMB fluctuations to “unilateralism, trade protectionism measures and the increase of tariffs on China.” For the full story, see https://www.cnbc.com/2019/08/05/chinas-central-bank-denies-its-devaluing-countrys-currency-to-counter-tariffs.html

When Federal Reserve Chairman Jerome Powell announced the latest interest rate cut on July 31, 2019, he said:  “We decided today to lower the target for the federal funds rate by ¼ percentage point to a range of 2 percent to 2¼ percent. The outlook for the U.S. economy remains favorable, and this action is designed to support that outlook. It is intended to insure against downside risks from weak global growth and trade policy uncertainty, to help offset the effects these factors are currently having on the economy, and to promote a faster return of inflation to our symmetric 2 percent objective. All of these objectives will support achievement of our overarching goal: to sustain the expansion, with a strong job market and inflation close to our objective, for the benefit of the American people.” A transcript of the press conference can be found here: https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20190731.pdf.

If one takes the statements from the two financial authorities and reads them together, they say basically the same thing – we are responding to market conditions!  The general consensus is the move by the U.S. was an ill-guided attempt to try to put more pressure on China. Given the law on which Secretary Mnuchin relies has no enforcement teeth, see 22 USC 5304, a critical question is just how will his attempts be received? The steps undertaken by the Administration so far has been to challenge everyone, friend and foe alike. Given the current economic conditions in China, if all things are equal, does anyone question how the IMF will decide?  This is where skilled negotiators and a disciplined Administration could have made a  real impact. In fact, there was some smart money wagering that labeling China a currency manipulator would be among the first step taken by the new Administration. Does the current action have any steam at this point in time? Does anyone see this ending positively for Mr. Mnuchin’s efforts?

While the Federal Register notice containing all the relevant details has yet to be published, today, the U.S. Trade Representative published an announcement confirming that certain unidentified products were removed from List 4 for health, safety, national security and similar reasons, and those remaining would be rolled out on two different lists with two different effective dates. List 4A will be effective September 1, 2019 and can be found here. List 4B can be found here, and will be effective on December 15, 2019. USTR notes the products on List 4B include “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”  Given the contents of List 4B, one is left to wonder whether USTR was trying to avoid making Christmas too grim for American consumers!

For those whose goods are on List 4A, it is still not clear whether September 1, 2019 is the date of entry in the U.S. or date of departure from China, but reliable sources say to expect that goods must be entered on or before August 31, 2019 to avoid paying this 10% tariff.  Good luck trying to get your goods to the U.S. in a rush in advance of the September 1 deadline. Cargo space (air and ocean) was already tight before this announcement and can only expect to get tighter.

One bit of quasi goods news is USTR stated in its announcement that an exclusion process will be provided for goods on Lists 4A and 4B, but nothing was said about beefing up staff and shortening the amount of time the exclusion process is taking to get to conclusion.

As has been repeatedly mentioned in the general press, President Trump tweeted on August 1st that the U.S. “will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country.” There are lots of questions about what that short message actually means, and right now, no answers. So far, there is no official notice from the U.S. Trade Representative (USTR) for publication in the Federal Register. There is nothing new posted on the USTR website. We know the President said he picked September 1st because there are goods on the water, but we do not know whether September 1st is the date by which the goods must arrive in the U.S., or must be exported from China. Will the products on List 4 change from those originally published? Whatever goods are on the final version of List 4, will at least some of the products be listed to the 10-digit level?dd Right now, all products are listed to the eight-digit level, but the descriptions assigned to those classifications, in some cases, do not include all the products encompassed by the very different products classified under that eight-digit number. This is typically the case due to either the type of good or its constituent material.

Given past history, we can only speculate, but until we see the official notice, we just do not know. So, first, if you can, get your goods imported no later than August 31st. For anyone whose goods are arriving in late August, make sure your customs broker selects the correct entry date (assuming the definition for date of import does not change), and then cross your fingers! There is just no telling how chaotic things will get.

Trade counsel have all spent time sharing the same basic list of recommendations for how companies can deal with these tariffs. There is one more point to add to that oft-discussed list. This option falls into the “better late than never” category – make sure your force majeure contract clause includes as grounds for cancellation the imposition of significant additional duties, taxes and/or assessments – and pick a percentage that defines “significant” (5%? 10%?) so there is little room to argue later. The Trump tariffs certainly should fall into this category, but given the plethora of antidumping and countervailing duty cases being brought against goods made in China and the percentages which result, imposition of those duties, too, should be grounds for cancellation.

The other thing to watch for is what additional retaliatory measures the Chinese impose. They cannot go tit-for-tat and impose tariffs on the same quantity and value of goods, but we do know there are delays galore with permits, licenses and the like, and a myriad of inspections being required on imported goods which have come out of the blue, to name the two most common complaints being heard from American exporters, at least from those whose goods are still being exported to China. What else will happen?

Originally published by the Journal of Commerce in July 2019

Much to the surprise of many American companies, my cost is going to go through the roof with a 25% tariff and price my products out of the market is not enough of a justification for an exclusion request to be granted. It was not sufficient for the goods on the China 301 Lists 1 or 2, and the same is true for List 3 goods. The process to file an exclusion request for List 3 goods was published in the June 24, 2019 Federal Register, which can be found here: USTR Notice re List 3 Exclusion Process.

Before summarizing the process, there are some important facts to keep in mind. First, the period in which to seek an exclusion opened on June 30, 2019 and closes on September 30, 2019.  Mirroring the process for Lists 1 and 2, once an exclusion request is posted in the portal, replies or objections must be filed within 14 days. Filers are then permitted to respond by the later of 7 days after the close of the 14 day response period, or 7 days after the posting of the response.

There is also a new portal – http://exclusions.USTR.gov – through which all exclusion requests must be filed.  New is the requirement that filers must register before submitting any exclusion requests.  Further, as before, the submission itself is accomplished by completing and uploading a form, but this time, that form includes the option for some data to be submitted confidentially, while still permitting attachments.  This is a marked improvement from earlier options since it eliminates the need to file two versions of a request – one public and one confidential.

Much of the same information is required for List 3 goods, as was required for goods on Lists 1 and 2, such as the name of the submitter (although the related contact information is now treated as confidential). Companies must state whether they qualify under the Small Business Administration small business standard.  If a third party, in what capacity is that third party acting (again the entity name is public but not the contact details). The importer must be identified as well as the primary point of contact, both of which are treated as confidential.

The 10-digit classification must be submitted along with a “complete and detailed” description of the product. This description is to include physical characteristics, any relevant functionality, unique physical features that distinguish it from other products at the 8 digit level, along with the product’s principal use. All of this information is treated as public, including any attachments used to identify the product, such as specification sheets.

The submitter’s relationship to the product, and whether or not this product and any comparable products are available from sources in the U.S. and third countries are considered public information, but one must also be prepared to explain why the product is not available from those other sources.  What attempts were made to source the product in the U.S. must also be reported. All of this information is treated as public.

When it comes to data about the value and quantity of Chinese-origin product purchased by the submitter in 2017, 2018 and QI 2019, along with similar data for purchases from third countries and domestic sources during the same period, this is all treated as confidential, along with the company’s gross revenue for the same period.

A submitter must publicly identify whether the imported product is used as a final product or an input, while the percentage that product represents of the company’s gross sales in 2018 is treated as confidential.

Next, one is expected to address whether the additional duties will cause “severe” economic harm to the submitter or other U.S. interests, which may be submitted as public or confidential.  Submitters must also state the total value of any imports on which exclusion was sought for goods on Lists 1 and/or 2.  This data is also treated as confidential information.  Any additional information may be submitted and may be public or confidential at the option of the submitter, but, at the same time, treated as public is whether the product for which exclusion is sought is strategically important to Made in China 2025 or any other Chinese industrial program.

Finally, submitters may include attachments which may be public or confidential, but should not contain written argument.

One other point to keep in mind is the flow of the process itself. When a submitter files an exclusion request, it is first vetted. A sort of checklist approach is used, meaning the application is checked to insure there is meaningful data inserted in each box in the form. Assuming yes, the exclusion request is posted on the portal. Once the objection and response periods close, all exclusions will be reviewed. Past history indicates that many are rejected at this Step 2 substantive review stage because, while information was submitted, it is inadequate in some way. It also appears that if a substantive objection is filed, the application is doomed.  Assuming the application gets through, Stage 3 consists of USTR and CBP consulting about how CBP would go about administering the exclusion. If the administration is too complex or convoluted, the application will fail, even thought otherwise meritorious.

In addition to the obvious challenge of pulling together the needed information in a convincing fashion is the fact that anyone is permitted to object. What this means is domestic industry is able to object and claim the ability to make the product in the U.S. and there is no means for USTR to test that assertion or validate the increased cost impact. So, one tip for submitters is make to sure to anticipate the likely objections and rebut them in your original filing if at all possible. Certainly, one should do so if an objection is filed.

An on-going source of frustration is the need to frame the submission in a way that outlines for Customs and Border Protection (CBP) how it would administer the exclusion. This can be a particular challenge since it is not altogether clear what criteria CBP is using, although reviewing the approved exclusion requests can be helpful on this topic.

So, as you think about seeking an exclusion request for any of your products on the Chain 301 List 3, as yourself: A) What information do I already have that responds to any of the topics required? B) What more do I need to get? C) How many of my products are key to our future business so it is worth my time (and the cost of our advisors) to prepare an exclusion request for each? D) Reading through what you have as objectively as possible, how convincing is the data I have? Can I make it more convincing? Can I make our exclusion request stand out>

There is a popular misconception that so long as any product is excluded under a specific classification, all products falling under that classification are excluded. That is not the case. Once an exclusion is granted for a specific product, it applies to all comparable products even if imported by another company. Even so, the importer is left to convince CBP his product is comparable. As such, submitters would be prudent to define their products as clearly and narrowly as possible.  Doing so enhances the likelihood of the approval of an exclusion request and also limits those competitors who are able to rely on that exclusion grant.

Canada has implemented economic sanctions to suppress international terrorism under three complimentary legal mechanisms:

1. The United Nations Al-Qaida and Taliban Regulations, imposed pursuant to the United Nations Act;

2. The Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism, also imposed pursuant to the United Nations Act; and

3. Part II.1 of the Criminal Code.

We are going to discuss the third mechanism today because less is known about it (generally speaking).  Many Canadian businesses operating internationally know about Canada’s multi-lateral economic sanctions.  Many do not realize that there are unilateral economic sanctions imposed under the Criminal Code.

Part II.1 of the Criminal Code imposes domestic prohibitions against dealing in property of certain domestic and international terrorist groups. The Criminal Code also sets out several offences relating to money laundering, the financing of terrorism, imposes specific reporting requirements, and imposes asset freeze obligations relating to terrorist property.

Pursuant to subsection 83.05(1) of the Criminal Code, “the Governor in Council may, by regulation, establish a list on which the Governor in Council may place any entity if, on the recommendation of the Minister of Public Safety and Emergency Preparedness, the Governor in Council is satisfied that there are reasonable grounds to believe that (a) the entity has knowingly carried out, attempted to carry out, participated in or facilitated a terrorist activity; or (b) the entity is knowingly acting on behalf of, at the direction of or in association with an entity referred to in paragraph (a).”  This means that the Federal Cabinet may add any entity to the list and then the prohibitions apply to that entity.

The currently listed entities are posted on the Public Safety website.  On June 21, 2019, the Federal Cabinet added to the Regulations Establishing a List of Entities (1) Blood & Honor and (2) Combat 18 to the list of terrorist entities.  Both entitles are neo-Nazi extremist networks founded outside Canada.  The addition of the two networks occurred after the Canadian Security Intelligence Service released its 2018 public report.

Also on June 21, 2019, the Federal Cabinet added to the list three organizations aligned with the Iranian regime (Al-Ashtar Brigades, Fatemiyoun Division and Harakat al-Sabireen) to the terrorist roster. These organizations were not added to the United Nations list and, therefore, the Criminal Code list is a form of unilateral economic sanctions.

The penalties under the Criminal Code for dealing with a listed entity (or a person acting on behalf of the entity) are:

(a) on summary conviction, to a fine of not more than $100,000 or to imprisonment for a term of not more than one year, or to both; or

(b) on conviction on indictment, to imprisonment for a term of not more than 10 years.

On 14 December 2012, the Supreme Court of Canada (“SCC”) unanimously affirmed in R v Khawaja, 2012 SCC 69, that the terrorism laws in Part II.1 of the Criminal Code are constitutional.  The companion appeal was Sriskandarajah v United States of America, 2012 SCC 70.

Canadian businesses often do not think about these Criminal Code economic sanctions and are not searching the listed entities list.  It is a mistake to miss this list.

On August 9, 2019, Canada’s Department of Finance announced that “Canada Welcomes Anticipated Construction of One of the World’s Cleanest LNG Facilities” and hidden in the announcement is an unusual exception to the Canadian International Trade Tribunal’s (“CITT”) antidumping order on Fabricated Industrial Steel Components (“FISC”).  On May 25, 2017, the CITT issued an antidumping order on FISC exported from or originating in China.  On June 9, 2017, the CITT issued its reasons for finding threat of future injury and for denying exclusion requests, including a request filed by LNG Canada.

The announcement states:

“In keeping with previous public statements that trade barriers would not be permitted to stand in the way of these historic private sector investments, the Government is providing relief from duties on fabricated steel contained in modules for the Woodfibre LNG project as well as the previously announced LNG Canada project, which is the single largest private sector investment in Canadian history. These modules are key components used in the construction of LNG facilities, and relief is being provided because modules of the size and complexity required for these projects are not available in Canada.”

Did the Department of Finance just call the CITT’s antidumping order a “trade barrier” on FISC from China?  Are all antidumping orders trade barriers or just the FISC order?

The Department of Finance appears to be issuing a remission order or an order in council for past imports by LNG Canada and future imports relating to the Woodfibre project.  The remission order/order in council does not yet appear to have been published in the Canada Gazette.

What this means is that even though the CITT did not grant the exclusion requested by LNG Canada, the Department of Finance is granting the exclusion.  While LNG Canada filed a judicial review with the Federal Court of Canada (A-195-17) with respect to the CITT’s decision to not grant an exclusion for large complex modules and the hearing was held in April 2018, no decision has been issued yet.  This means that the Department of Finance has resolved the issue without waiting for the Federal Court of Appeal decision.

Even though there was no public interest inquiry filed with the CITT under section 45 of the Special Import Measures Act, the Department of Finance will be publishing a remission order for any antidumping duties on FISC imported for use in the Woodfibre LNG project.

Even though the Canada Border Services Agency (“CBSA”) conducted the first scope proceeding, which was filed by LNG Woodfibre and issued a decision on November 28, 2018 that the heavy complex components in the LNG Woodfibre project were within the scope of the Tribunal’s Order in the FISC case, the Department of Finance is granting the exception.

There exception is not authorized in the Special Import Measures Act.  However, it is authorized in the Financial Administration Act as the Department of Finance has the authority to issue remissions orders.

This is a first and sets a precedent. The Department of Finance has acknowledged that “modules of the size and complexity required for these projects are not available in Canada”.  This statement effectively says that the CITT’s test for granting an exclusion is satisfied for the LNG Woodfibre complex modules.  The Department of Finance has essentially overridden a decision of the CITT.  Further, other importers of complex modules may use this precedent to seek an exclusion by way of an interim review proceeding or during the expiry review proceeding.  Importers may also go straight to the Department of Finance to get the exclusion if they feel that the CITT may not grant the exclusion.  This is truly an unusual situation.

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