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Proving FTA preferential tariff eligibility: The evidentiary burden in Canada

Posted by on Jan 7, 2020

Jean-Marc Clément Counsel, Woods LaFortune Montréal, Canada As is the case with most free trade agreements, importers simply claim preferential tariff eligibility at the time of import. This claim can later be subject to verification by the customs administration in view of determining if it was valid. Proving preferential tariff entitlement requires assembling and presenting relevant facts and documents that support the claim. But just how much evidence is necessary in order to discharge that burden? In Canada there has always been a disconnect between what the Canada Border Services Agency (CBSA) deems necessary in the course of an origin verification and what the courts find satisfactory in the course of a judicial review. What follows are certain illustrations of that disconnect and how it usually gets resolved by Canadian courts. Although Canada is a signatory to many free trade agreements, the North American Free Trade Agreement (NAFTA) is by far the most popular and widely used given the amount of trade that takes place between the United States of America (USA) and Canada. For this reason, we drafted our comments with the NAFTA rules of origin in mind. That said, most of the other free trade agreements work in a similar fashion and our remarks would equally apply as concerns them. We should also mention that, at the request of the USA, the NAFTA was recently renegotiated by the parties. Although a new agreement was reached, it hasn’t gone through the ratification process by the respective legislatures at the time of writing this article and thus our comments relate to the text currently in force as of October 31, 2019. The burden of proof in NAFTA claims At the risk of sounding too simplistic, importers and exporters need only prove that which is necessary in order to demonstrate eligibility, not all that the customs administration may find interesting to collect in the context of verifications. CBSA has a habit of asking for the exact same things in every origin verification they undertake regardless of how goods are said to qualify: they always ask for producer records, costed bills of material, sources supply for the materials, etc. At times,...

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NAFTA is dead! Long live NAFTA!

Posted by on Dec 18, 2018

Jean-Marc Clément, LL.L. – Counsel – Woods, LaFortune LPP Contact: e-mail – clement@wl-tradelaw.com; phone – 1-514-570-6144 NAFTA Redo – Trade Lawyer’s View The purpose of this article is not to paint a detailed picture of NAFTA but rather share a Canadian trade lawyer’s perspective on the evolution of a 25 year-old agreement that was recently modernized for the 21st Century. NAFTA resuscitation It’s fair to say that NAFTA received very little attention over the course of its lifespan, until the 20th anniversary came along in 2014 that is, only to fall quickly out of the spotlight once again for the next couple of years. Until an election promise came along.  And then NAFTA suddenly became the poster child of everything that had gone wrong in America. Back in 1989, Canada and the USA had taken a step in the right direction. Recognizing that the two Northern neighbors had such a natural fit for commerce, a trade deal would help cement the relationship. It should be said that both countries had been early adopters and supporters of the GATT multilateral system in the late 1940s, but they would certainly be able to dive deeper in trade liberalization and commit that to paper. Hence the Canada-US FTA was introduced and paved the way for greater predictability in international trade in North America, reduced costs at the border and improved competitiveness on the world stage. Then it was the year of the three amigos in 1994. Bringing Mexico into the equation presented a challenge but additional opportunities as well. A few more chapters were added to the agreement and side agreements were reached on labor and the environment. Meanwhile the WCO multilateral system slowly came to a grinding halt. Bilateralism became the new focus in America and elsewhere. And then the 2017 US elections came along. NAFTA apparently had to be either dramatically improved or thrown in the shredder. After more than a year of grueling negotiations behind closed doors, the self-imposed deadline of September 30th had apparently been met and a joint statement confirmed that an agreement had been reached. Autumn leaves and November signings What quickly followed was the (not...

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Sweeping Changes to Canada’s Food Regulations

Posted by on Feb 7, 2017

It is fair to say that Canada’s food safety programs strive to keep pace with the global food environment, with a view to protect the health of Canadians. For years the federal government has been working on improving standards in food safety while keeping an eye on harmonizing the Canadian system as much as possible with those of its key trading partners. Well, the long-awaited modernization of Canada’s food regulatory landscape is finally coming to a close: indeed the Canadian Food Inspection Agency (CFIA) – one of many Canadian food regulators – published proposed new regulations in the Canada Gazette Part I publication issued January 21, 2016. You may access this publication by following this link: The CFIA notice begins at page 258 by providing a very instructive backgrounder on this colossal food modernization undertaking. Then from page 338 to 540 the proposed text of the new regulations is reproduced in its entirety; it is aptly called Safe Food for Canadians Regulations. The proposed regulations aim to combine various disparate food requirements found in numerous regulations under a common regulatory umbrella. It deals with food standards of course, but also with food packaging, labeling, registrations, licensing, inspections, to name but a few. One noteworthy provision deals with the mandatory requirement to possess a fixed place of business in Canada in order to import food. Failing that, non-resident importers can only bring food from a foreign state that has a food safety system equivalent to Canada, or make the appropriate arrangements with a Canadian-based importer. Minor exceptions apply in specific circumstances. It is worth noting that the new regulations are at the proposal stage at the moment. CFIA invites views from stakeholders to be communicated to them in the next 90-days, or until April 21, 2017 to be precise. Food is one of the most complex commercial sectors to manage when ensuring compliance with import and export trade requirements. Hard to imagine but food is perhaps more heavily regulated than, say, arms and munitions. Health and safety of consumers is of course at the top of the regulators’ mind, with trade facilitation a distant second. Those involved in food trade...

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CETA Will Increase US Exports to Canada: That Should Make A President-Elect Happy

Posted by on Dec 13, 2016

Free trade is complicated business, as will soon find out US president-elect Donald Trump. NAFTA may very well be up for a major grooming, but CETA (crossing fingers now) will increase US exports to Canada and advance the balance of trade in favor of the Americans. And a healthy trade balance is a principle very dear to Mr. Trump who’s looking to restore fairness in trade deals. On the flip side, are more imports bad for the Canadian economy? Imports typically get a bad rap and are usually seen as the culprit in international trade. Well the answer is no, considering that those imports will create jobs and provide Canadian export opportunities with the EU. And Canada is well positioned to attract those US manufacturers and investors who will be looking north to get their goods into the EU market. One of the least talked about repercussion of CETA is the impact it will have on US manufacturing moving to Canada. Perhaps not the entire US plant will be moving here, but some part of the manufacturing process will certainly migrate north. Most CETA analysis reported in Canadian media focuses on threats to certain Canadian industries; attention hasn’t yet shifted south concerning our trade with the USA. No doubt US manufacturers will have a serious look at Canada to produce goods that are primarily aimed for EU clients, in addition to serving their Canadian market. Some serious planning will be going in meeting rooms across the fifty states: How to manufacture enough in the US to ship NAFTA qualifying inputs/components duty free across the Canadian border, and then sufficiently transform or add value to those inputs/components in Canada to make a qualifying CETA good entering the EU with preferential treatment? That will be the question. Increasingly US exports to the EU will shift to Canada. Semi-manufactured US goods will come to Canada first, where sufficient Canadian content can be added to qualify for CETA. Although not an agreement that should concern American manufacturers at first glance, they will soon be learning CETA rules of origin that matter most to them. Perhaps getting better at it then most Canadian manufacturers...

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CBSA looks into furniture imports for tariff classification accuracy

Posted by on Nov 28, 2015

The Canada Border Services Agency (CBSA) is still very actively examining imports of furniture for tariff classification accuracy. Why? Because there is possibly 8% to 10% in additional tariff revenue to collect. Those familiar with the Canadian Tariff Schedule structure will know that a distinction is made between furniture used in a domestic dwelling as opposed to furniture used in public buildings and outdoor spaces. If your business imported furniture in Canada in the past, now would be a good time to examine those customs filings very closely. Many forget that said filings stay alive for a period of 4 years, and so yes, those furniture shipments from 2012 are still at risk of a retroactive customs duty assessment. Because tariff classification accuracy of furniture requires more than just knowledge of the furniture business, and because it has been the substance of many court decisions, those concerned with the potential risk raised in this post would be well advised to get some external advice from counsel familiar with this...

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