Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

China 301 Tariffs Took Effect – What Happens Next?

Posted in Aerospace & Defence, Agriculture, Border Security, Buy America, Corporate Counsel, Countermeasures, Cross-border deals, Cross-border trade, Customs Law, Exports, Legal Developments, tariffs, Trade Agreeements, Trade Remedies

The U.S. Trade Representative (“USTR”) issued a press release on July 6, 2018 in which the process companies can use to seek exclusion from the 25% tariff imposed on the same day on goods from China was announced. The timeline requires all original exclusion requests to be filed by October 9, 2018. Each will be reviewed to insure completeness and will then be posted for public review, and 14 days from the date of any posting, all objections are due. No more than 7 days later, any applicant may file its reply. All such submissions are filed through regulations.gov and must reference Docket No. USTR-2018-0025.

The first noticeable difference between the 301 and 232 product exclusion processes is the provision allowing replies. Another notable difference with the 301 exclusion process is trade associations are permitted to submit requests. As before, each request must relate to a specific product and provide the required supporting data and basis for the exclusion request. Details about what exactly is required can be found in the Federal Register notice referenced in the USTR press release. Another notable difference from the 232 process is that for any product where exclusion is granted, that exclusion applies to all imports of that product, not just those of the applicant. Further, all exclusions granted for the proscribed one year period will be retroactive to July 6, 2018, when the tariff was imposed.

Forms are recommended for the request, objection and reply, along with allowing more expansive information to be filed in the form of a public version of any filing and one filed with business proprietary information (“BPI”). Once the official Federal Register notice is published, the trade can expect those forms will be accessible from the regulations.gov portal.

Obviously, USTR learned from the 232 experience and is attempting to streamline the process, and cut the workload. Some of the 232 applications have been ruled upon and, right now, the only sense one gets is if your application was not subject to objection, it was granted. However, if an objection was filed, the application was denied. It will be interesting to see how much impact the ability to file a reply will have on the ultimate determination.

If you have not already done so, now is the time to engage in a few best practices when it comes to dealing with the 301 tariffs (and frankly any others which may be imposed).

  • Have you confirmed your product is properly classified?
  • If not, do so, and figure out where it should be classified and how that impacts the duty you have been paying. Should a prior disclosure be filed?
  • If you are on the 301 list, what options do you have for alternate sourcing? How long will it take for any foreign or U.S. suppliers to ramp up production to meet your needs and those of your competitors?
  • One of the steps which quickly became clear in the 232 context was any number of American companies who objected to an exclusion request by saying they could produce the product in question and claimed any past attempts to be a supplier to the applicant ended up in a disagreement over price. Quite often, that was a simple answer, and declining to use the American supplier had more to do with any number of objective factors such as quality, quantity, timing, and so on, not just the price.
  • Should you file for an exclusion? If so, can you distinguish your product from those of your competitors to a significant enough degree that the cost and effort you incur helps you the most, rather than your competitors?

While companies are dealing with implementation of the 25% tariff imposed on first round of Chinese-made goods, List 2 continues through the notice and comment process. That timeline is:

◄ 6-29-18 – Due date to request to appear and submit a summary of testimony and filing pre-hearing submissions.

◄ 7-20-18: Due date for written comments.

◄ 7-24-18: Public hearing

◄ 7-31-2018: Due date for submission of post-hearing rebuttal comments.

Where do you stand in being ready to deal with the 301 tariffs – those imposed and those threatened? Many medium and smaller sized companies are still trying to figure out how they will cope. Make sure to work with your trade compliance consultants to carefully balance the very real need for many to stay in business, with the practical need to stay compliant. Anecdotally, we are hearing about many suppliers who are offering options that do not really work. CBP continues to carefully monitor trade volumes, and any major shift in those patterns will be met with appropriate enforcement action. This is, of course, in the face of the continuing concern about transshipments. Finally, are you prepared for List 3? This would be the list that results from President Trump’s instruction to USTR Lighthizer to identify another $200 billion in Chinese goods on which to impose additional tariffs.

USTR Press Release: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/ustr-releases-product-exclusion

Pre-publication Federal Register – https://ustr.gov/sites/default/files/enforcement/301Investigations/FRN%20exclusion%20process.pdf.

How does the Canada-US trade war affect cross-border shoppers?

Posted in Canada's Federal Government, Countermeasures, Customs Law, GST/HST, tariffs

On July 1, 2018, Canada imposed countermeasures (that is, 10% duties) on a number of U.S. origin goods.  These new duties will apply to goods that are purchased by Canadians who shop in the United States.  Canadian cross border shoppers may be asked more questions at the Canada Border Services Agency (“CBSA”) Primary Inspection Booth and may have to go to the Secondary Inspection Area to undergo a Secondary Examination or pay the cashier.  This will add time to a Canadian cross border shoppers return trip to Canada.

What U.S. Origin Goods Are Subject to a 10% Tariff?

Canadian cross border shoppers are likely to purchase groceries or consumer goods. We have prepared a handy cheat sheet (in alphabetical order) of the goods that Canadian cross border shoppers might buy in the United States.  The following goods (and potentially similar goods that are classified under the same H.S. code) will be subject to the 10% tariff:

Adhesives Aerated Water Aluminum Doors, Windows and Frames Aluminum Kitchen or Household Articles Aluminum Nails
Aluminum Scouring Pads Aluminum Screws Aluminum Staples Aluminum Tacks Aluminum Washers
Ball Point Pens BBQ Sauce Bedding Bobbins Bourbon
Broth Candles Candy – Chocolate Bars or Slabs (filled) Candy – Chocolate Bars or Slabs (not filled) Candy – Licorice
Cast Iron Grills Coffee – Roasted – not decaffeinated Comforters Confectionaries Cooking Chambers
Cucumbers Dishwashers Dishwasher Detergent Dryers Facial Cleansers
Facial Tissues Freezers Fungicides Gherkins Glue
Greeting Cards Face Cleaners Felt Tipped Pens Hair Lacquers Handkerchiefs
Herbicides Incense Inflatable Boats Insecticides Kitchenware
Laminated Wood Lawn Mowers Maple Sugar Maple Syrup Markers
Mattresses Mayonnaise Mineral Water Meat-Beef Meat-Spent Fowl
Mixed Condiments Mixed Seasonings Motor Boats Nail Polish Nail Polish Remover
Nail Decorations Nail Cuticle Creams Orange Juice (not frozen) Organic surface-active products and preparations for washing the skin Outboard Motor Boats
Ovens Paper Paperboard Pickles Pillows
Pizza Plastic bags and sacks Plastic household articles Plastic Hygienic
Articles
Plastic Toilet Articles
Playing Cards Pleasure Boats Plywood Plywood, consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6 mm thickness; Other, with both outer plies of coniferous wood Postcards
Prepared Meals that contain Beef Prepared Meals that contain Chicken or Turkey Printed Cards Quiche Quilts
Ranges Razors Refrigerators Room Deodorizers Room Fresheners
Room Sprays Salad Dressing Sauces Seats with Wooden Frames Serviettes
Shaving Cream Shaving Lotion Sailboats Sleeping Bags Soap
Soya Sauce Spools Stoves Strawberry Jam Table Cloths
Tableware Tapers/Candles Tissue Paper Toilet Paper Tomato Ketchup
Tomato Sauces Upholstered Seats with a wooden frame Veneer Panels Washing Machines Water
Water – Flavoured Water – Sweetened Water Heaters Whiskey Yogurt

 

In addition, other aluminum goods are subject to a 10% tariff and steel products are subject to a 25% tariff.  The complete lists 1, 2 and 3 are posted by the Government of Canada.

Do Canadians have to pay the tariffs?

The answer is yes. Canadian consumers will have to pay the tariffs if they go shopping.  In a Canadian resident is outside Canada for less than 24 hours, they must report all goods purchased or acquired outside Canada and must pay all applicable duties and taxes.  There is no personal exemption limit (there used to be a limit of $50, but it has not been available for a while). So, if a Canadian resident buys $CDN 100 of U.S. origin chocolate, he/she should expect to pay tariffs of $10 and applicable GST/HST on $CDN 110 (the tariff included converted price).

A Canadian resident who is outside Canada for more than 24 hours and less than 48 hours cannot import alcohol under the personal exemption limit of $200.  This would mean the Canadian resident would have to pay duties of 10% on any whiskey or bourbon and all applicable GST/HST on the tariff included converted price.

If a Canadian resident who is outside Canada for more than 24 hours and less than 48 hours returns with more than $CDN worth of goods, full duties (including the countermeasures tariffs) and GST/HST/sales tax must be paid on all the goods.

Do Visitors to Canada have to pay the tariffs?

The answer is yes. A visitor to Canada must declare all goods that he/she importing that the visitor intends to consumer in Canada or leave in Canada (e.g., provide to a Canadian resident as a gift).  Gifts valued at $CDN 60 or less each may be brought into Canada duty free and tax free. Gifts worth more than $60 CDN are subject to duty on the excess amount. Alcoholic beverages, tobacco products and advertising materials do not qualify as gifts.

NEXUS

If a NEXUS Card holder fails to declare to the CBSA goods that are subject to the countermeasures tariffs, the CBSA may confiscate their NEXUS Card.

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

Canada Retaliates

Posted in Aerospace & Defence, Antidumping, Border Security, Buy America, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Government Procurement, Imports Restrictions, Legal Developments, NAFTA

On June 29, 2018, Canada released its list of products on which retaliation will be taken against the 232 steel and aluminum tariffs imposed by the U.S. Table 1 products are subject to a 25% surcharge. While the products listed on Tables 2 and 3 are subject to a 10% surcharge. See Canada 232 Retaliation Lists for further details.

To Tariff or Not to Tariff – That Is The Question!

Posted in Aerospace & Defence, Agriculture, Border Security, Buy America, Controlled Goods Program, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Government Procurement, Legal Developments, NAFTA, Trade Agreeements, Trade Remedies

In the current tit for tat environment that overhangs international trade, below is an update regarding the 232 tariffs on steel and aluminum, the 301 tariffs related to China’s intellectual property rights and other business practices, and the 232 tariffs threatened on automobiles and parts.

Steel and Aluminum Tariffs:

As everyone by now knows, effective March 23, 2018, the U.S. imposed a 25% tariff on selected steel products and a 10% tariff on selected aluminum products.  The basis for this action was a finding by the Dept. of Commerce that foreign competition had essentially undermined U.S. steel and aluminum production capabilities and so triggered national security concerns.  In this context national security equates to economic security.  The shorthand reference in this context is 232, the section of the law -The Trade Expansion Act of 1962 – under which the Administration acted.

Customs and Border Protection clarified the affected products:

(1) “Aluminum” products are defined in the Harmonized Tariff Schedule (HTS) as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plates, sheets, strips, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS classifications.

(2)  “Steel” products are defined in the HTS as: (i) 7206.10 through 7216.50, (ii) 7216.99 through 7301.10, (iii) 7302.10, (iv) 7302.40 through 7302.90, and (v) 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.

Initially, certain traditional U.S. trading partners were exempted, but then not. South Korea reached agreement with the U.S. to revise the free trade agreement between the parties, and so as of May 1, 2018, the affected steel products from South Korea are subject to an agreed upon quota limit, but not the 25% steel tariffs.  The aluminum tariff remains in place.

Regarding steel and aluminum products from Argentina, Australia and Brazil, in the Presidential Proclamations Adjusting Imports of Steel and Aluminum issued on May 31, 2018, the successful conclusion of negotiations with these countries was announced and quotas imposed accordingly.

At the same time, our trading partners have been busy. Perhaps not surprisingly, China was the first to act. On March 29, 2018, it published a list of products on which retaliation would be taken against the U.S.’ 232 actions.  China’s World Trade Organization (“WTO”) complaint can be found here: China WTO Complaint, and lists the products on which retaliation was immediately imposed.

Next came India which filed at the WTO on May 18, 2018, see India WTO Complaint. The list of products on which retaliation is being taken was provided by way of a revision filed on June 13, 2018 and can be found here: India Product List. India first said retaliation would occur within 30 days and in the subsequent product list filing, the retaliation date was stated as May 18, 2018.

The European Union filed its own WTO complaint with a corresponding list of products on which retaliation would be taken, see EU WTO Complaint, starting on June 22, 2018.

The third country to file on May 18, 2018 was Russia. Its WTO complaint can be found here: Russia WTO Complaint, but no specific products are listed, only the promise that more details will follow.  In terms of when retaliation takes effect, Russia said within 30 days of its filing.

Turkey filed next on May 22, 2018, see Turkey WTO Complaint, and included its own list of products on which retaliation was to be applied effective June 21, 2018.

Japan also filed a WTO complaint on May 22, 2018, Japan WTO Complaint, which was supplemented on June 20, 2018, Japan WTO Supplement, but neither filing includes specifics about possible products.  Retaliation was to take effect within 30 days.

Finally, Norway has filed its own action to seek consultations with the US over the 232 tariffs, see Norway WTO Consultation Request. Consultations are the first step in the WTO process, and occur prior to filing a complaint. Many U.S. trading partners indicated they have been rebuffed when attempting consultations, so odds are that Norway’s complaint will soon be filed.

As to our NAFTA partners, Canada published a list of products on which retaliation will be imposed effective July 1, 2017.  That list can be found here: Canada 232 Retaliation Lists with Table 1 products subject to a 25% surcharge. While the products listed on Tables 2 and 3 are subject to a 10% surcharge. Mexico published its own list of products on which retaliation is taken effective June 5, 2018: Mexico Retaliation Notice.

China and 301:

In much the same way 232 laid the foundation for the U.S. to impose the steel and aluminum tariffs, 301 is another provision of another trade act which permits corrective action against U.S. trading partners, this time under the Trade Act of 1974. In this context, the culprit is China and its practices regarding intellectual property rights and other business actions, as has been widely reported.

Based on Congressional mandate, the U.S. Trade Representative (“USTR”) conducts regular reviews of the state of intellectual property rights throughout the world, and, in the past, typically found China’s practices to be troublesome and nothing more, but the Trump Administration changed policy and decided that punitive tariffs were in order.  The imposition of a 25% tariff on selected Chinese goods was announced on June 15, 2018.  This action followed the publication by USTR in early April on which retaliation was proposed.  The end result is that two lists were published in June when the final decision was announced.  The press release itself can be found here: USTR Press Release re China 301 Tariffs.  List 1 is published here: USTR China List 1, and List 2 here: USTR China List 2.  For products found on List 1, the 25% tariff takes effect on July 6, 2018.  For the products on List 2, since they are different from those originally mentioned, they will undergo notice and comment.  The relevant dates are as follows:

◄     June 29, 2018: Due date for filing requests to appear and a summary of expected testimony at the public hearing and for filing pre-hearing submissions.

◄     July 20, 2018: Due date for submission of written comments.

◄     July 24, 2018: The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW Washington, DC 20436 beginning at 9:30 a.m.

◄     July 31, 2018: Due date for submission of post-hearing rebuttal comments.

If your products are on List 2, now is the time to submit comment about why your products are unique, cannot be found in the U.S. or cannot be found at a reasonable cost or in adequate quantities in the U.S.

Not surprisingly, almost immediately, China announced it would retaliate, see China 301 Retaliation Notice.  Schedule 1 can be found here – China 301 Retaliation Schedule 1  and, effective July 6, 2018, China’s 25% tariff takes effect.  Schedule 2 consists of products on which official action is intended but not yet taken, see China 301 Retaliation Schedule 2.

In response, on June 18, 2018, President Trump announced he directed USTR to identify $200 billion worth of Chinese goods which are to be subject to an additional 10% tariff.  See Trade With China Statement. The general consensus is the amount of trade with China does not present $200 billion in additional products on which to impose tariffs. So, how this will be implemented by the U.S. remains unclear.  Similarly, the expectation is China will find ways in addition to increased tariffs to make life difficult for American companies, such as delaying visas for business travelers,  increasing inspections of and delaying goods arriving at the borders, slowing down the granting of permits and licenses, raising new and different objections to new businesses where Americans are owners, enhancing its protective measures over key/sensitive industries, and other more subtle means to make it difficult/impossible for Americans to do business in China.

232 & Automobiles/Parts:

The third category of additional tariffs is expected to come from this review which was announced on May 23, 2018. Like the steel and aluminum tariff action, the auto and auto parts action is framed in the context of the decline in the production of autos and auto parts equates to a threat to U.S. economic security, and so national security.  The public hearing is scheduled to be held on July 19 and 20, 2018. It is expected that once the process is completed, the findings will support imposition of additional tariffs on these products, too.

The European Union 232 steel and aluminum retaliatory tariffs just took effect. Immediately President Trump took to Twitter, continued his attacks on the EU’s trading framework, and mentioned a 20% tariff to be imposed by the U.S. on European-made vehicles.   Is there really any doubt as to how the auto and auto parts 232 investigation will come out?   President Trump went on to say that European automakers should build their cars in the U.S., see Tweet re EU Tariffs. Perhaps someone in the Administration could point out many of the European auto makers already build many of their models in the U.S.  Interestingly, so do many of the Japanese auto makers. Are they next?  The only group that seems to be safe is the Korean auto makers, and then only because renegotiations regarding the Korea-U.S. Free Trade Agreement were recently concluded.

25% Tariff Imposed in Chinese Goods

Posted in Aerospace & Defence, Border Security, Buy America, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Intellectual Property, Legal Developments, Trade Agreeements, Trade Remedies

The U.S. Trade Representative (USTR) today issued two lists of products on which the U.S. seeks to impose tariffs on goods made in China at a 25% rate.  The lists together cover 1,102 tariff lines valued at approximately $50 billion.  According to the USTR’s release, the list of products settled on was intended to focus on “products from industrial sectors that contribute to or benefit from the “Made in China 2025” industrial policy,” and include aerospace, information and communications technology, robotics, industrial machinery, new materials and automobiles.  Cellular telephones and televisions are not included.

The List 1 can be found here China 301 retaliation – List 1 and List 2 here China 301 retaliation – List 2. The 25% duty results from the recently completed 301 investigation and will be imposed on the products in List 1 starting on July 6, 2018. Those goods are said to be worth approximately $34 billion. The products on List 2, which are estimated to be worth $16 billion, will undergo further review, including public notice and comment, and a public hearing, before the list is finalized.  USTR also stated a process will be published to allow companies to seek exclusions for particular products.

Poof Goes the Rule of Law!

Posted in Anti-Trust/Competition Law, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Exports, Legal Developments, Trade Remedies

Originally published by the Journal of Commerce in June 2018.

There was a strong temptation to title this column – What the Football!  President Trump has spent a good deal of his time recently excoriating professional football players about their actions when it comes to the nation anthem. He seems to have not spent even a fraction of that time addressing the implications of the recent settlement with ZTE China.

For those who have not followed the case, ZTE China faced both criminal charges and civil fines for its actions in circumventing U.S. export laws related to the sale of products to Iran, and to a lesser extent, Sudan,  North Korea, Syrian and Cuba (more background can be found below).  The original settlement with the Dept. of Justice resulted in ZTE China (two related entities) pleading guilty and being subject to the largest criminal fine/civil penalty then imposed, along with three years of corporate probation. Additionally, the company agreed to put in place a monitor who was to report to the court about the success of ZTE China’s newly upgraded compliance program.

ZTE China also agreed to pay fines to the Bureau of Industry and Security (BIS) and the Office of Foreign Assets Control (OFAC) pursuant to settlement agreements with those agencies. BIS suspended an additional $300,000,000 fine which would be imposed if ZTE China violated its settlement with the agency. The total overall forfeiture and fine amount that ZTE China was to pay the U.S. Government was $1.19 billion with $300,000,000 suspended.

Five (5) weeks later, BIS issued a denial order in which the following statements were made by the then Acting Assistant Secretary of Commerce for Export Enforcement: “[ZTE agreed to the record-high combined civil and criminal penalties after]  engaging in a multi-year conspiracy to violate the U.S. trade embargo against Iran to obtain contracts to supply, build, operate, and maintain telecommunications networks in Iran using U.S.-origin equipment, and also illegally shipping telecommunications equipment to North Korea .. .”  In the face of “ZTE ‘s Pattern of Deception, False Statements, and Repeated Violations of U.S. Law,” BIS found ZTE had violated the terms of the settlement, and imposed the denial order.  Given U.S. sanctions laws apply directly (barring the acquisition of U.S. parts from U.S. sellers) and indirectly (barring the acquisition of U.S. parts from third parties, even those outside the U.S.), ZTE China was effectively put out of business

Secretary Ross issued a statement at the time saying “ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation … ZTE misled …  Commerce … This egregious behavior cannot be ignored.”

Then, last month, it was announced that at the request of Chinese President Xi, President Trump instructed Commerce Secretary Ross to find a different solution, one that would allow ZTE China to stay in business. The outcome we learned last Thursday June 7th was a new deal was struck wherein ZTE China will now pay an even larger fine and accept other conditions.

Based on the press release issued by Secretary Ross on the 7th, ZTE will now pay an additional $1 billion on top of the $892 million previously paid. Plus, an additional $400 million must be posted into a “suspended penalty” escrow account before “BIS will remove ZTE from the Denied Persons List” Secretary Ross went on to say: “ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years. Their function will be to monitor on a real-time basis ZTE’s compliance with U.S. export control laws. … ZTE is also required under the new agreement to replace the entire board of directors and senior leadership for both entities [i.e., Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd].  Finally, the new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period. These collectively are the most severe penalty BIS has ever imposed on a company …  The purpose of this settlement is to modify ZTE’s behavior while setting a new precedent for monitoring to assure compliance with U.S. law. Embedding compliance officers into the company vastly improves the speed with which the Department of Commerce can detect and deal with any violations.”

One is left to ask, what did the U.S. really get?  If money alone was the cure for bad actors, fines of large sizes would have been imposed years ago. If replacing executives and boards would do the trick when dealing with a Chinese company, that, too, would have been done a long time ago. Ironically, last Thursday, the CEO of Qualcomm was quoted as hoping the deal with NXP in China would now finally be approved by the Chinese authorities!  Was that the quid pro quo? If so, one has to ask – who got the better deal?

When you consider the behavior that originally led BIS, OFAC and Justice to proceed involved a long history by ZTE of bad and intentional actions, were these terms enough?   Does anyone think the new team can’t figure out a more sophisticated means to get U.S. telecom equipment sold to Iran or North Korea?

ZTE knew the items it was acquiring in the U.S. could not be shipped or sold to Iran, North Korea or any other embargoed country. So elaborate plans were hatched that involved subterfuge, evasion, outright lies and destruction of evidence, including to the American subsidiary’s lawyers and consultants who were trying to help the company address the allegations against it! Just how convinced are you the U.S. got a “good deal”?

Knowing it was under investigation, ZTE took steps to mislead the U.S. government, which included having the involved individuals sign non-disclosure agreements. ZTE management gave false statements to the company’s counsel knowing they would be shared with the U.S. government, including that sales to Iran had ended and thereby stating the company was now in compliance with U.S. law.  Further, existing data was hidden from the forensic accounting firm hired by defense counsel to conduct an internal investigation.  The withheld data was omitted from reports prepared and given to the U.S. government, thereby ZTE provided false statements.  To further avoid detection, ZTE formed a “contract data induction team” of about 13 people with the goal to “sanitize the databases” of all relevant information. To further cover their tracks, emails by team members were subject to a 24 hour auto-delete function.

When you listen to the relevant U.S. government representatives, you are left wondering – What the Firetruck? The violations by ZTE were export related and so the activities of BIS, OFAC and Justice were law enforcement in nature.  Do you really deal with violators who rub their noses at U.S. law by upping the fine and changing management and board members?  In a curious coincidence of timing, on June 7th, the current Assistant Secretary of Commerce for Export Administration spoke at the annual meeting of an international trade association. His point was that BIS does not set policy, but rather enforces the law. He went on to also say: “We don’t negotiate national security.”  So, when the regulatory consequence / rule of law states if you violate the law, get fined, agree to a settlement and then lie about your level of compliance, that means you are placed on the denied parties list, how does changing that long-standing law enforcement / rule of law outcome not amount to setting a new policy? Whether it also means the U.S. negotiated national security remains to be seen.  As this column is published, President Trump is in Singapore to meet with Supreme Leader Kim of North Korea. Maybe that was the quid pro quo with the Chinese government?

Anyone who deals regularly with China will not be in the least surprised to hear in the future that American telecommunications equipment ended up in Iran or in the hands of other questionable end users, and that result can be traced back to a ZTE affiliate, perhaps this time through more sophisticated schemes than the ones reported in the settlement documents publicly filed. In the end, most international traders who attended the referenced annual conference were left wondering – did the U.S. get enough in return to make the deal with ZTE worthwhile?

What Are Canada’s Economic Sanctions Against Venezuela?

Posted in Canada's Federal Government, Corporate Counsel, Cross-border trade, Export Controls & Economic Sanctions, Politics

Canada imposes two types of unilateral economic sanctions against Venezuela.  Canada imposes unilateral economic sanctions under the Special Economic Measures Act (and Special Economic Measures (Venezuela) Regulations).  Canada also imposes unilateral economic sanctions and trade restrictions pursuant to the Justice for Victims of Corrupt Foreign Officials (Sergei Magnitsky Law) Act and Justice for Victims of Corrupt Foreign Officials Regulations. Both sets of economic sanctions are intended to put financial pressure on President Maduro and his inner circle.

On September 5, 2017, Canada imposed the SEMA sanctions in order to implement the decision of the association formed between Canada and the United States.  On November 3, 2017, Canada imposed its first round of Magnitsky sanctions shortly after the passage of the Justice for Victims of Corrupt Foreign Officials (Sergei Magnitsky Law) Act. Global Affairs’ statement concerning the Magnitsky sanctions against Venezuela reiterated Canada’s concern about the political and economic crisis in Venezuela.  On May 30, 2018, Canada announced in a news release “Canada imposes further sanctions on the Maduro Regime in Venezuela” that it was adding 14 more names to the SEMA Designated Persons List in response to May 20, 2018 Venezuela Election.  This May 30, 2018 announcment occurred one day after the release of the report by the Panel of Independent International Experts on possible crimes against humanity in Venezuela and one day before Minister Freedland was to attend a meeting on the Assembly of American States’ General Assembly. The May 30, 2018 additions to the SEMA Designated Persons List includes Maduro’s wife and family members of the late President Hugo Chavez.

Who in Canada Needs to Be Aware of Canada’s Sanctions Against Venezuela?

Any Canadian or business in Canada that does business with Venezuela or Venezuelans should carefully review the two sets of economic sanctions.  In addition to financial institutions (e.g., banks, financial advisors, insurance companies), real estate companies and condominium sales entities, businesses in the oil and gas section, engineering companies, service providers, exporters of goods, etc. there are many others who need to be aware of the sanctions.

When I was younger, many children at Canadian camps were from Venezuela.  Venezuelan officials may also send their children to Canadian private schools and universities.  It is important to obtain information about relatives of Venezuelan citizens who are in Canada benefiting from our health care and education systems.

SEMA Asset Freeze and Prohibitions

Canada’s SEMA sanctions against Venezuela are a combination of an asset freeze and prohibitions.  The SEMA sanctions against Venezuela include:

  1. Persons in Canada and any Canadian outside Canada shall not deal in any property, wherever situated, that is owned, held or controlled by person on the SEMA Designated Persons List or by a person acting on behalf of a person on the SEMA Designated Persons List.
  2. Persons in Canada and any Canadian outside Canada shall not enter into or facilitate any transaction related to a dealing in any property, wherever situated, that is owned, held or controlled by person on the SEMA Designated Persons List or by a person acting on behalf of a person on the SEMA Designated Persons List.
  3. Persons in Canada and any Canadian outside Canada shall not provide any financial or related services in respect of a dealing in any property, wherever situated, that is owned, held or controlled by person on the SEMA Designated Persons List or by a person acting on behalf of a person on the SEMA Designated Persons List.
  4. Persons in Canada and any Canadian outside Canada shall not make available any goods, wherever situated, to a person on the SEMA Designated Persons List or by a person acting on behalf of a person on the SEMA Designated Persons List.
  5. Persons in Canada and any Canadian outside Canada shall not provide any financial or related services to or for the benefit of a person on the SEMA Designated Persons List.
  6. Persons in Canada and any Canadian outside Canada shall not knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, any probitied act in 1-5 above.

There are a number of exceptions to the above listed prohibitions.

Magnitsky Asset Freezes and Prohibitions

Canada’s Magnitsky sanctions against Venezuela are a combination of an asset freeze and prohibitions.  The Magnitsky sanctions against Venezuela duplicate some the SEMA sanctions and, in some cases, differ from the SEMA sanctions.  The Magnitsky sanctions are more expansive in their scope to cover property, services and financial services:

The prohibitions under Canada’s Magnitsky Law include:

  1. Persons in Canada and any Canadian outside Canada shall not deal in any property, wherever situated, that is owned, held or controlled by person on the Magnitsky Designated Persons List or by a person acting on behalf of a person on the Magntisky Designated Persons List.
  2. Persons in Canada and any Canadian outside Canada shall not enter into or facilitate any financial transaction related to a dealing in any property, wherever situated, that is owned, held or controlled by person on the Magnitsky Designated Persons List or by a person acting on behalf of a person on the Magnitsky Designated Persons List.
  3. Persons in Canada and any Canadian outside Canada shall not provide any financial services or any other services to a person on the Magnitsky Designated Persons List or on behalf of a person on the Magnitsky Designated Persons List or on the direction or order of a person on the Magnitsky Designated Persons List.
  4. Persons in Canada and any Canadian outside Canada shall not acquire financial services or any service for the benefit of  or on the direction of a person on the Magnitsky Designated Persons List.
  5. Persons in Canada and any Canadian outside Canada shall not make available any property, wherever situated, to a person on the Magnitsky Designated Persons List or by a person acting on behalf of a person on the Magnitsky Designated Persons List.
  6. Persons in Canada and any Canadian outside Canada shall not knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, any probitied act in 1-5 above.

There are a number of exceptions to the above listed prohibitions.

Designated Persons Lists

Canada has creates two lists of designated persons.  There are 54 individuals (all associated with the Maduro Regime, including Nicolas Maduro Moros) named in the Special Economic Measures (Venezuela) Regulations a (“SEMA Designated Persons List”) and 19 individuals named in the Justice for Victims of Corrupt Foreign Officials Regulations (“Magnitsky Designated Persons List”).

The following individuals are named in both the SEMA Designated Persons List and the Magnitsky Designated Persons List as at June 1, 2018:

  • Nicolás MADURO MOROS
  • Tareck Zaidan EL AISSAMI MADDAH
  • Gustavo Enrique GONZÁLEZ LÓPEZ

The following individuals are named only and the Magnitsky Sanctions List as at June 1, 2018:

  • Adán Coromoto CHÁVEZ FRÍAS
  • Luis Ramón REYES REYES
  • Rocco ALBISINNI SERRANO
  • Alejandro Antonio FLEMING CABRERA
  • Rafael Darío RAMÍREZ CARREÑO
  • Carlos Alberto OSORIO ZAMBRANO
  • Luis Alfredo MOTTA DOMÍNGUEZ
  • José Vicente RANGEL ÁVALOS
  • Eulogio Antonio DEL PINO DÍAZ
  • Nelson José MERENTES DÍAZ
  • José David CABELLO RONDÓN
  • Rodolfo Clemente MARCO TORRES
  • José Gregorio VIELMA MORA
  • Francisco José RANGEL GÓMEZ
  • Ricardo Antonio MOLINA PEÑALOZA
  • Argenis de Jesús CHÁVEZ FRÍ

The following individuals are named only to SEMA Sanctions List as at June 1, 2018:

  • Elías José JAUA MILANO
  • Tarek Willians SAAB HALABI
  • Néstor Luis REVEROL TORRES
  • Roy Antonio María CHADERTON MATOS
  • María Iris VARELA RANGEL
  • Pedro Miguel CARREÑO ESCOBAR
  • Diosdado CABELLO RONDÓN
  • Susana Virginia BARREIROS RODRÍGUEZ
  • Freddy Alirio BERNAL ROSALES
  • Delcy Eloína RODRÍGUEZ GÓMEZ
  • Tania D’AMELIO CARDIET
  • Aristóbulo ISTÚRIZ ALMEIDA
  • Jorge Jesús RODRÍGUEZ GÓMEZ
  • Francisco José AMELIACH ORTA
  • Carlos Alfredo PÉREZ AMPUEDA
  • Sergio José RIVERO MARCANO
  • Jesús Rafael SUÁREZ CHOURIO
  • Carmen Teresa MELÉNDEZ RIVAS
  • Bladimir Humberto LUGO ARMAS
  • Gustavo Enrique GONZÁLEZ LÓPEZ
  • Elvis Eduardo HIDROBO AMOROSO
  • Remigio CEBALLOS ICHASO
  • Antonio José BENAVIDES TORRES
  • Hermann Eduardo ESCARRÁ MALAVÉ
  • Sandra OBLITAS RUZZA
  • Socorro Elizabeth HERNÁNDEZ HERNÁNDEZ
  • Maikel José MORENO PÉREZ
  • Gladys María GUTIÉRREZ ALVARADO
  • Juan José MENDOZA JOVER
  • Luis Fernando DAMIANI BUSTILLOS
  • Lourdes Benicia SUÁREZ ANDERSON
  • Carmen Auxiliadora ZULETA DE MERCHÁN
  • Arcadio de Jesús DELGADO ROSALES
  • Calixto Antonio ORTEGA RÍOS
  • Andrés Eloy MÉNDEZ GONZÁLEZ
  • Manuel Enrique GALINDO BALLESTEROS
  • Vladimir PADRINO LÓPEZ
  • Iania Valentina DÍAZ GONZÁLEZ
  • Fidel Ernesto VÁSQUEZ IRIARTE
  • Carolys Helena PÉREZ GONZÁLEZ
  • Cilia Adela FLORES DE MADURO (Maduro’s wife)
  • Erika del Valle FARÍAS PEÑA
  • Ramón Darío VIVAS VELASCO
  • Christian TYRONE ZERPA
  • Fanny Beatriz MÁRQUEZ CORDERO
  • Malaquías Gil RODRÍGUEZ
  • Indira Maira ALFONZO IZAGUIRRE
  • Jhannett María MADRIZ SOTILLO
  • Carlos Enrique QUINTERO CUEVAS
  • Xavier Antonio MORENO REYES
  • Carlos Alberto ROTONDARO COVA

It is important to realize that the above names are only a starting point.  The prohibitions and asset freezes extend to other persons where the activity benefits a designated person or is on the direction of order of a designated person.  This means that family members could be covered (such as children).  It also means that companies associated with the designated persons are covered (e.g., the designated person or a company owned by a designated person is a shareholder of the company).  Further, representatives and agents may be covered (e.g., a Venezuelan lawyer or holding company hired by a designated person who is soliciting goods, property or services, including financial services) may be covered.

It is also important to know that Canada’s SEMA Designated Persons List and Magnitsky Designated Persons List may change at any time.  Both lists should be reviewed carefully.

For more information about complaince with CAnada’s economic sanctions against Venezuela, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.

 

232 Auto Investigation Timeline Published

Posted in Anti-Trust/Competition Law, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Imports Restrictions, Legal Developments, NAFTA, Trade Agreeements, Trade Remedies

The Federal Register notice advising the timeline which applies to the Administration’s 232 investigation regarding automobiles and parts was published on May 30, 2018.  The relevant time frame requires that written comments are due by June 22, 2018 and rebuttal comments by July 6, 2018.  A public hearing will be held on July 19 and 20, 2018.  All comments should be filed through www.regulations.gov referring to Docket Number DOC-2018-0002.

In particular, Commerce wants information about:

  • The quantity and nature of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts and other circumstances related to the importation of automobiles and automotive parts;
  • Domestic production needed for projected national defense requirements;
  • Domestic production and productive capacity needed for automobiles and automotive parts to meet projected national defense requirements;
  • The existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce automobiles and automotive parts;
  • The growth requirements of the automobiles and automotive parts industry to meet national defense requirements and/or requirements to assure such growth, particularly with respect to investment and research and development;
  • The impact of foreign competition on the economic welfare of the U.S. automobiles and automotive parts industry;
  • The displacement of any domestic automobiles and automotive parts causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
  • Relevant factors that are causing or will cause a weakening of our national economy;
  • The extent to which innovation in new automotive technologies is necessary to meet projected national defense requirements;
  • Whether and, if so, how the analysis of the above factors changes when U.S. production by majority U.S.-owned firms is considered separately from U.S. production by majority foreign-owned firms; and
  • Any other relevant factors.

As usual, the process describes how the comments are to be filed, permits the submission of business confidential information, outlines the process to request to speak and submit testimony at the hearing and emphasizes all testimony, oral or written, must address the factors listed in 15 C.F.R. § 705.4 (a list which nearly mirrors the factors Commerce cites in its notice):

(a) To determine the effect on the national security of the imports of the article under investigation, the Department shall consider the quantity of the article in question or other circumstances related to its import. With regard for the requirements of national security, the Department shall also consider the following:

(1) Domestic production needed for projected national defense requirements;

(2) The capacity of domestic industries to meet projected national defense requirements;

(3) The existing and anticipated availabilities of human resources, products, raw materials, production equipment and facilities, and other supplies and services essential to the national defense;

(4) The growth requirements of domestic industries to meet national defense requirements and the supplies and services including the investment, exploration and development necessary to assure such growth; and

(5) Any other relevant factors.

(b) In recognition of the close relation between the strength of our national economy and the capacity of the United States to meet national security requirements, the Department shall also, with regard for the quantity, availability, character and uses of the imported article under investigation, consider the following:

(1) The impact of foreign competition on the economic welfare of any domestic industry essential to our national security;

(2) The displacement of any domestic products causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects; and

(3) Any other relevant factors that are causing or will cause a weakening of our national economy.

The complete Federal Register notice can be found here: https://www.gpo.gov/fdsys/pkg/FR-2018-05-30/pdf/2018-11708.pdf.

Which Way Is Up?

Posted in Aerospace & Defence, Agriculture, Antidumping, Border Security, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Imports Restrictions, Legal Developments, NAFTA, Trade Agreeements, Trade Remedies, World Trade Organization

This client alert was originally published on May 30, 2018, and now there is an update. Today, May 31st, President Trump announced a resolution with Argentina, Brazil and Australia regarding the 232 tariffs on steel (25%) and/or aluminum (10%), but as there is no similar agreement with Canada, Mexico or the EU, the tariffs on products from those countries was reinstated. See https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-approves-section-232-tariff-modifications-2/ for the basic announcement.

The announcement about Argentina and Australia and their aluminum exports to the U.S. can be found here – https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states-4/ and makes clear a quota has been imposed. A similar announcement was published regarding steel products imported into the U.S. from Argentina and Brazil, see https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states-4/.

Living true to the times, it is nearly impossible to find predictability in current events.   That fact makes it quite challenging for businesses, and we have recent events adding to the confusion.

One notable example is that on June 1, the suspension of the 232 tariffs on steel (25%) and aluminum (10%) expire on the relevant goods from Australia, Argentina, Brazil, Canada, Mexico and the EU member countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom.  Last reports indicate that negotiations with Australia continue, while the NAFTA renegotiations with Canada and Mexico seem mired in the automobile domestic content requirement.

India has joined China in challenging reliance on 232 by the U.S. before the World Trade Organization, but both cases are in the very early stages, so any resolution is far off.  After imposition of the steel tariffs, South Korea quickly negotiated a permanent exemption by agreeing to the imposition of a quota. In exchange, as part of the renegotiation of the Korea-U.S.  Free Trade Agreement, U.S. automakers obtained greater access to markets in South Korea.

We are in the midst of the changes brought by the U.S. withdrawal from the Iran nuclear deal.  In addition, despite statements by various administration officials in recent days to the contrary, on May 29th the White House announced that 25% tariffs will be imposed on Chinese made goods very soon. While a specific list of goods was not published, the list published in April itemized $50 billion worth of goods that could be impacted.  The White House stated: “[t]he United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology.”  The Administration committed to announce those changes by June 30, 2018. In addition, the release goes on to state, the U.S. continues to pursue action at the World Trade Organization regarding China’s practices regarding licensing of intellectual property. Finally, comes the 25% tariff. The stated focus of the products listed will be “industrially significant technology, including those related to the “Made in China 2025” program.”  The final list of products is due to be announced by June 15, 2018. The White House announcement goes on to state a series of additional demands which very much mirror the recent ill-fated meetings in Beijing.

May 23, 2018, of course, saw the announcement by the Trump Administration of a 232 investigation into the auto industry.  Much of this action is seen, at least in part, as a ploy to gain a negotiating edge with Canada and Mexico in those NAFTA renegotiations, but whether that works remains to be seen.  What this new 232 action portends about continued exemption of the EU member countries from the 232 steel and aluminum case also remains to be seen.  As we go to press, the Federal Register notice which outlines the relevant timeline for this new 232 investigation, has yet to be published.

Similar to the steel and aluminum cases, the context for this 232 investigation into the auto industry is also framed as an increase in the trade deficit (imports have grown from 32% of cars sold to 48% in the past 20 years) but also “whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electronic motors and storage, advanced manufacturing  processes, and other cutting-edge technologies.” While framing national security as equating to economic security as permitted by law, the justification for this investigation raises even more questions about whether such action is a proper application of 232, especially since the stated justification seems to focus on the inability of the U.S. to keep up with the competition. Traditional 232 actions have focused on defense articles, strategic resources and energy goods. While being creative is to be encouraged, the legal question is whether this is a step too far? As such, assuming the auto industry investigation (on automobiles, SUVs, vans, light trucks and part) concludes with tariffs be imposed, this context seems to present an even more compelling reason for litigation to challenge the Administration’s action in the U.S. courts.

Reliance on 232 was recently challenged regarding the steel and aluminum tariffs at the Court of International Trade by a German-owned steel exporter who sought an injunction stopping the imposition of these tariffs.  Once the injunction was denied, the case was dropped, so the substantive arguments are yet to be fully vetted. See Severstal v U.S.,  Case No. 18-00057, Slip Op. 18-37 (April 5, 2018).

Further confounding matters is the situation with ZTE. First, the U.S. government conducted an investigation and found that ZTE repeatedly violated U.S. export sanctions on Iran and North Korea, lied about its actions even to its own counsel and internal investigators, and generally flunked the “attitude test.” The company pled to a criminal violation. The immediate fine was $892 million, with $300 million in future penalties, dependent on its compliance with the terms of the deal. A short time later, the full amount had to be paid and a 7 year denial order was issued because the company failed to meet the terms of the settlement.  The intelligence community had such serious doubts about ZTE that it recommended against Americans purchasing their smartphones due to concerns about national security.

Then, in the midst of the 301 investigation into China, and the on-going North Korea situation, Mr. Trump instructed the Commerce Dept. to come up with a different solution.  While it remains to be seen what will be the ultimate outcome, Mr. Trump seems to favor a larger fine so as to allow the company to continue in business. The amount of the fine being mentioned publicly is $1.3 billion, but we do not yet know if that amount is firm or whether ZTE will get credit for the amount already paid?

Then you have the on again off again meeting with North Korea.  News reports indicate the meeting was cancelled due to what Mr. Trump called North Korea’s “tremendous anger and open hostility” to the U.S. which was blamed on China. Given the desire to have China’s support to sway the North Koreans and also to accomplish a major trade deal with China, one has to conclude raising the fine on ZTE to $1.3 billion is related, especially since word has now come out that the Qualcomm – NXP deal will again be approved by the Chinese government. Supposedly there are additional conditions to be imposed on ZTE,  including tighter security rules, a Chinese commitment to buy more American components, and a new management team and board.  Given that Chinese firms answer in the end to the government, it would not be surprising to find the intelligence community’s position does not change.

Right now the question is will he or won’t he? Will Mr. Trump meet with Mr. Kim? If so, when? If the outcome leads to substantive results, that would be wonderful. The worry has to remain what happens if the outcome is less than satisfactory? What is Plan B?

Given the current climate, for companies right now, the favored approach seems to be to stay the course and remain engaged in the political process whenever and wherever possible, but hunkering down continues to be an ever increasing challenge!

Canada Announced New Marking Rules for Steel and Aluminum

Posted in Antidumping, Border Security, Canada's Federal Government, Customs Law, origin, Trade Remedies, U.S. Federal Government

On May 30, 2018, Canada’s Minister of Finance announced new marking rules for steel and aluminum products.  In a News Release entitled “Canada Bolsters Prevention of Transshipment and Diversion of Steel and Aluminum Products Through Country of Origin Marking Regime“, the Department of Finance announced that Canada was aligning its marking rules with the United States’ marking rules (the U.S. regime requires all foreign-origin steel and aluminum products to be marked with a country of origin). as a result of the new marking rules, foreign steel and aluminum that is not properly marked with country of origin will not be released into Canada by the Canada Border Services Agency.  It will either be sent back to the country of shipment or it will be destroyed.

Changes will be made very soon to two regulations:

(1) Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations; and

(2) Determination of Country of Origin for the Purposes of Marking Goods (Non-NAFTA Countries) Regulations.

Foreign manufacturers of steel and aluminum products will be expected to mark the goods with a country of origin marking.

The following changes were proposed in the Canada Gazette on April 28, 2018:

Table 1: Proposed amendments to the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations and the Determination of Country of Origin for the Purpose of Marking Goods (Non-NAFTA Countries) Regulations

Existing Text Proposed Amendments
None (add in new section in Schedule 1) Add in new text after Schedule 1 (Subsection 2(1)):

1 Goods of Steel or Aluminum

Goods of steel or aluminum classified in headings 72.06 through 72.15, subheadings 7216.10 through 7216.50 or 7216.99, headings 72.17 through 72.29, subheading 7301.10, 7302.10, 7302.40 or 7302.90, headings 73.04 through 73.06, heading 76.01, headings 76.04 through 76.09 or castings or forgings of subheading 7616.99, except wire (other than barbed wire)

2(12) Iron or steel pipes and tubes Delete “or steel”
Renumber sections to reflect new section 1
Schedule II (Subsection 2(2))

4. Used goods, with the exception of iron or steel pipes and tubes

4. Used goods, with the exception of iron pipes and tubes, or goods of steel or aluminum listed in Schedule 1, section 1
5. Goods that are for the exclusive use of the importer or the importer’s employees and not for resale to the general public, with the exception of iron or steel pipes and tubes 5. Goods that are for the exclusive use of the importer or the importer’s employees and not for resale to the general public, with the exception of iron pipes and tubes, or goods of steel or aluminum listed in Schedule 1, section 1
8. Goods that are imported for subsequent exportation from Canada, with the exception of iron or steel pipes and tubes 8. Goods that are imported for subsequent exportation from Canada, with the exception of iron pipes and tubes, or goods of steel or aluminum listed in Schedule 1, section 1

Table 2: Additional amendments to the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations (Schedule III — Tariff Shift Rules)

Existing Text Proposed Amendments
Schedule III

  • 72.01 – 72.29
  • A change to headings 72.01 through 72.29 from any other heading, including another heading within that group.
Replace rules 72.01 through 72.29 with the following:

  • 72.01 – 72.06
  • A change to headings 72.01 through 72.06 from any other heading, including another heading within that group.
  • 72.07
  • A change to heading 72.07 from any other heading, except from heading 72.06.
  • 72.08
  • A change to heading 72.08 from any other heading.
  • 72.09
  • A change to heading 72.09 from any other heading, except from heading 72.08 or 72.11.
  • 72.10
  • A change to heading 72.10 from any other heading, except from headings 72.08 through 72.12.
  • 72.11
  • A change to heading 72.11 from any other heading, except from headings 72.08 through 72.09.
  • 72.12
  • A change to heading 72.12 from any other heading, except from headings 72.08 through 72.11.
  • 72.13
  • A change to heading 72.13 from any other heading.
  • 72.14
  • A change to heading 72.14 from any other heading, except from heading 72.13.
  • 72.15
  • A change to heading 72.15 from any other heading, except from headings 72.13 through 72.14.
  • 72.16
  • A change to heading 72.16 from any other heading, except from headings 72.08 through 72.15.
  • 72.17
  • A change to heading 72.17 from any other heading, except from headings 72.13 through 72.15.
  • 72.18
  • A change to heading 72.18 from any other heading.
  • 72.19 – 72.20
  • A change to headings 72.19 through 72.20 from any other heading outside that group.
  • 72.21 – 72.22
  • A change to headings 72.21 through 72.22 from any other heading outside that group.
  • 72.23
  • A change to heading 72.23 from any other heading, except from headings 72.21 through 72.22.
  • 72.24
  • A change to heading 72.24 from any other heading.
  • 72.25 – 72.26
  • A change to headings 72.25 through 72.26 from any other heading outside that group.
  • 72.27 – 72.28
  • A change to headings 72.27 through 72.28 from any other heading outside that group.
  • 72.29
  • A change to heading 72.29 from any other heading, except from headings 72.27 through 72.28.
  • 76.01 – 76.06
  • A change to headings 76.01 through 76.06 from any other heading, including another heading within that group.
  • 7607.11 – 7607.20
  • A change to subheadings 7607.11 through 7607.20 from any other subheading, including another subheading within that group.
  • 76.08 – 76.15
  • A change to headings 76.08 through 76.15 from any other heading, including another heading within that group.
  • 76.01 – 76.04
  • A change to headings 76.01 through 76.04 from any other heading, including another heading within that group.
  • 76.05
  • A change to heading 76.05 from any other heading, except from heading 76.04.
  • 76.06 – 76.15
  • A change to headings 76.06 through 76.15 from any other heading, including another heading within that group.

It should be expected that the regulatory changes will be published soon.

The Department of Finance also announced that it was hiring more CBSA Officers to enforce border laws.  The new funding is to allow the CBSA to identify and stop companies that try to avoid AD/CVD duties and give the CBSA greater flexibility in responding to situations where home market pricing is problematic.

If you have any questions, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.