Posted by Michael Woods on Jun 18, 2015

In our previous article on “non-violation nullification and impairment” (“NVNI”) trade law claims we reviewed the 1993 Canada- U.S. Free Trade Agreement (FTA) Panel –Puerto Rico Regulations on the Import, Distribution and Sale of UHT Milk from Québec [USA-CDA-1993-1807-01].  In that case, Canada successfully relied upon a NVNI claim with respect to the introduction of new measures that had the effect of prohibiting the sale of Québec produced UHT milk in Puerto Rico.  While the Panel was not able to find a breach of the “letter” of the FTA, it concluded that the measure in question ran counter to the   “spirit” of the agreement and that the requirements for a NVNI claim had properly been met. Non-violation claims have been made in both the GATT and WTO context and the principle has been adopted in other WTO Agreements as well as free trade agreements like the NAFTA.  Yet, there have been few successful cases and historically the remedy has been approached with caution as there is concern about the potential for abuse.   Nevertheless, the NVNI option demonstrates that the WTO dispute settlement can stretch beyond the “letter” of the trade agreement in question.   As highly regarded trade law expert, Professor John H. Jackson noted  in World Trade and the Law of GATT:  “  … the prerequisite to invoking (the dispute settlement process under GATT) Article XXIII does not depend upon a breach of the GATT agreement and furthermore, does not depend upon any measure of another contracting party.”  Rather, the keys to the concept of “nullification or impairment” are the overall “balance of benefits” in the agreement and  a parties’ resulting  “reasonable expectation.”  The overwhelming number of GATT / WTO disputes have involved a review of measure(s) in place that violate one or more provision of the agreement. Such a case is considered to be a prima facie violation (which may be rebutted).   In contrast, a NVNI complaint can be made to challenge any measure applied by another Member provided that it results in “nullification or impairment of a benefit.”  The basis of NVNI is found in GATT 1994 Article XXIII:1(b): Article XXIII: Nullification or Impairment If any contracting...

Posted by Woods LaFortune LLP on Jun 15, 2015

The “Rules of Origin” under NAFTA are the criteria used to determine the country of origin of a product that is being imported or exported within the NAFTA region. As part of NAFTA, the United States, Canada and Mexico (the “Parties”) have all agreed to reduce and/or eliminate tariffs on goods that originate from their respective territories.  However, the Parties continue to apply significantly higher tariffs to goods that do not originate in one of the NAFTA countries. Maximum benefits (i.e. duty free entry into the NAFTA market) are only conferred upon goods that are said to “originate” in one of the three NAFTA countries. Rules of Origin are therefore extremely important, because they act as the mechanism that determines which goods can be properly classified as “originating” in the NAFTA territory. Consequently, this decides which goods are entitled to preferential tariff treatment. Why you need to know the rules A proper understanding of the rules and their application is critical for any importer/exporter conducting business in the NAFTA region. This knowledge enables them to leverage available preferences and reduce the likelihood of stiff monetary penalties and fines. As a start, the Rules of Origin inform what information an exporter will put on their Certificate of Origin, which is a necessary document to claiming and obtaining a NAFTA tariff preference for imported goods. The Certificate of Origin requires that the exporter properly identify the Country of Origin of the goods they are shipping – in other words, the exporter is responsible for the correct determination of the “origin” of the exported goods. Invalid Certificates of Origin based on an improper or incorrect classification of the “origin” of a good, have recently become one of the largest problem areas for exporters, often resulting in significant fines and penalties. An invalid NAFTA Certificate of Origin will result in the denial of NAFTA origin duty free treatment. And be warned, duties can be applied retroactively. The complicated world of determining origin In an increasingly global marketplace, where final products are commonly composed of inputs from various geographic locations, it can often be difficult to properly determine the origin of a good. As...

Posted by Gordon LaFortune on Jun 2, 2015

In case there is anyone out there who still doesn’t understand the importance of complying with every mandatory requirement in a Request for Proposals (RFP), the CITT’s recent decision in Falcon Environmental Services Inc. (CITT File Nbr. PR-2014-061) sends a very harsh message.  In all cases, bidders have to identify the mandatory requirements of an RFP, understand and address the mandatory requirements in their bid and be able to demonstrate that they met all of the mandatory requirements if PWGSC ever questions compliance. Mandatory requirements are a key element of every RFP.  To be considered compliant, a bid must meet the mandatory requirements of the RFP when it is submitted.  Government entities that create RFPs must clearly identify the mandatory requirements of the RFP.  At that point, it is up to the bidders to understand the mandatory requirements and their application so that they can submit a fully responsive bid.  As an example of best practice, one of my clients appoints a member of its bid response team to be “mandatory man” for each bid.  Mandatory man is responsible for identifying every mandatory requirement in the RFP and for ensuring that each is fully addressed in the bid.  None of this should come as a surprise to anyone involved in government procurement. The issue in Falcon Environmental was whether Falcon Environmental properly submitted its bid to PWGSC.  The RFP, which was for the provision of wildlife control services for the Department of National Defence (DND), included a mandatory requirement that bids be submitted to PWGSC`s Bid Receiving Unit in Halifax.  The RFP also noted that the wildlife control services being procured would be provided to DND at its Willow Park facility in Halifax. Falcon Environmental claimed that it used Canada Post’s courier service to send its bid to PWGSC’s Bid Receiving Unit and that the bid was submitted two days before the bid closing date stipulated in the RFP.  PWGSC claimed that it never received the bid directly from Falcon Environmental.  PWGSC claimed that it found the bid at DND’s Willow Park facility and returned the bid to Falcon Environmental on the basis that it did not comply with...

Posted by Gordon LaFortune on May 12, 2015

All credit to the Canadian negotiators who worked on the Canada – E.U. Comprehensive Economic and Trade Agreement (CETA).  The CETA was the product of years of preparation and negotiations that began in 2009.  The Canadian negotiating team identified Canadian interests and defensive positions and took those to the negotiating rounds to create the Agreement that was ultimately signed with the E.U.  Like any other agreement, the CETA was the product of “give and take” in which the concessions that Canada won from the E.U. through the negotiations were bought and paid for with concessions extended by Canada to the E.U.  And like any other agreement, the final result was a balance of concessions that was acceptable to both parties. Having concluded the negotiations, the parties should now be moving full speed toward implementation, but instead Greece is threatening to reject the CETA unless it is amended to specify that only Greece can use the term “Feta” to describe salty, white cheese.  Currently, CETA Chapter 22, Article 7.6 provides an exception from the rules providing protection for geographical indications that allows Canadian companies that produced “Feta” cheese (and “Asiago”, “Fontina”, “Gorgonzola” and “Munster” cheese) prior to October 18, 2013 to continue to use these indications for their cheeses.  Because of the E.U.’s interest in protecting geographic indicators, it is safe to assume that Canada made concessions to secure the right of its producers to continue to use “Feta” and the other terms, and that this is the only reason why they are listed as exceptions. Although it is not clear whether Greece could stop the E.U. from implementing the CETA if it presses this point, the real concern is that Greece is attempting to force a unilateral amendment to the CETA to gain a greater advantage after the negotiations were concluded.  Use of the term “Feta” was obviously considered during the negotiations and that was the proper time for Greece to raise its concerns with the E.U.  The E.U. could have sought an exclusive Greek right to use “Feta” through the negotiations and offered concessions to Canada to obtain this result.  This would have changed the balance of concessions...

Posted by Michael Woods on May 7, 2015

  In our recent articles on GATT 1994 Article XXI – the national security exception – we referred to the potential of a “non-violation” claim as a possible response by a WTO member country whose trade is affected by a national security exception measure. This is the first of a series of articles which examines the unique and rarely applied provisions of non-violation nullification and impairment (“NVNI”). We will start with one of the few Chapter 18 (state-to-state) trade panels under the original Canada-U.S. Free Trade Agreement (FTA).  In 1993, Canada challenged a Puerto Rican measure that prohibited the sale of ultra-high temperature UHT Milk in Puerto Rico.  Pursuant to the terms of the FTA and the NAFTA which supersedes it, the United States (as with the other NAFTA members) is responsible for the measures of its subnational bodies. The Panel –Puerto Rico Regulations on the Import, Distribution and Sale of UHT Milk from Québec [USA-CDA-1993-1807-01]- found that there was no violation by the U.S. of FTA obligations with respect to the probation on import restrictions pursuant to Article 407 or of the rules in Chapter 7 governing trade in agricultural products. The Panel declined to rule on Canada’s national treatment arguments under Articles 501 and 502.  Nevertheless, Canada won the case.  How? Simply put, the Panel determined that the Puerto Rico measures in question defeated the “reasonable expectation” of benefit that Canada could “expect to derive form the FTA”. In essence, Canada had included a  “non-violation nullification and impairment” claim in its complaint and it ultimately proved to be the “trump card.” The case involved aseptically processed ultra-high temperature milk (”UHT milk”) which is produced by treating fluid milk to a high temperature for a specified period of time.  The milk is then cooled to room temperature and is aseptically packaged in hermetically sealed containers. The shelf life of properly processed and handled UHT milk is between six and twelve months at room temperature.   From 1977 until 1991, UHT milk from Québec, which was exported throughout the Caribbean, dominated the Puerto Rico market.  It was sold in Puerto Rico on the basis of the Puerto Rico Secretary of Health’s...

Posted by Gordon LaFortune on Apr 24, 2015

Recently, the Canada Border Services Agency (CBSA) determined that Oil Country Tubular Goods (OCTG) imported from nine subject countries was dumped and the Canadian International Trade Tribunal (CITT) found that these dumped imports threatened to cause injury to like goods produced in Canada.   Although this decision will result in anti-dumping duties and normal values being applied against OCTG imported from the nine subject countries involved in the case, the domestic mills who initially brought the case forward have now filed Applications for Judicial Review of the CBSA dumping determination by Federal Court of Appeal.  By taking the unusual step of challenging a determination in a case that they ostensibly won, the domestic mills have now signalled that they are not satisfied with the outcome.  All of which begs the question of who, if anyone, actually won this case? In Oil Country Tubular Goods, (CITT File Nbr. NQ-2014-002) the CITT determined that imports of Oil Country Tubular Goods (OCTG) originating in or exported from Chinese Taipei, India, Indonesia, the Philippines, Korea, Thailand, Turkey, Ukraine and Vietnam were dumped and threatened to cause injury to domestic producers of like goods in Canada.  The CITT also determined that the volume of subsidized goods imported from some of these countries were negligible and so terminated its inquiry with respect to the subsidizing of OCTG from India, Indonesia and Vietnam. In its dumping and subsidy investigations, the CBSA determined that OCTG imported from the nine subject countries were dumped and that OCTG imported from India, Indonesia and Vietnam was subsidized.  The CBSA had already terminated its subsidy investigation concerning OCTG imported from the Philippines, Thailand and Ukraine. As a result of the CITT and CBSA findings, anti-dumping duties will be assessed against imports of OCTG from the nine subject counties when they are shipped to Canada based on the dumping margins and normal values determined by the CBSA.  The CBSA found dumping margins for OCTG produced by cooperating exporters ranging from 0% to 28%, with most cooperating exporter dumping margins in the range of 0% to 8%.  The “All Others” rate established by the CBSA through Ministerial Specification was set at 37.4%.  By any...