Posted by Michael Woods on Dec 9, 2014

The “Sleeping Giant” – with all the attention devoted to the recent conclusion of the Canada and European Union (EU) Comprehensive Economic and Trade Agreement [“CETA”], Canada’s new Free Trade Agreement [“FTA”] with Korea may be getting overshadowed.  In my view, the Canada-Korea Free Trade Agreement will prove to be one of Canada’s most important trade policy initiatives since the landmark Canada – U.S.  FTA and the North American Free Trade Agreement [“NAFTA”] were negotiated 25 and 20 years ago respectively [see, https://www.wl-tradelaw.com/woods-lafortune-discuss-25th-anniversary-of-free-trade/] For one thing, this represents a breakthrough for Canada as it marks its first FTA with an Asia-Pacific partner.  For another, the Canada-Korea Free Trade Agreement [“CKFTA”] has now been ratified and will come into force on January 1, 2015 – years ahead of CETA’s projected implementation. I personally like to call it the “Sleeping Giant” because of its potentially critical, although possibly less visible, role in Canada’s trade policy framework.  It is also of special importance to me because I was privileged to serve as Commercial Counsellor at the Canadian Embassy in Seoul where I learnt about Korea’s long and proud history. In fact, its original emergence as a single unified country dates back to the 7th century.  For much of its history, Korea was relatively isolated and shrouded in mystery – known as the Hermit Kingdom. The modern nation was established in 1948 with the creations of the Republic of Korea [“ROK” or “Korea”] in the south and the Democratic People’s Republic of Korea [“DPRK”] in the north.  Following the struggle, hardships, and losses of the Korea War (1950-1953), the ROK began a determined, brave, and ambitious course. While maintaining and drawing on its centuries old culture and traditions, the Sleeping Giant awoke to the world of global trade and investment and build a powerhouse economy. Today the ROK is the world’s 15th-largest economy and the fourth-largest in Asia. Isolated no longer, it has become both an Asian-Pacific gateway and a hub for global trader. Under our publications section, we have posted Part I in a three part series on the Canada-Korea FTA. The “Canada-Korea Free Trade Agreement Part I: The Sleeping Giant –...

Posted by Gordon LaFortune on Dec 3, 2014

The recent Federal Court of Appeal decision in Canada (Border Services Agency) v. Dorel Industries Inc., 2014 FCA 258 (CanLII) [“CBSA v. Dorel“], has made it more important for importers, who receive duty drawback or other refunds from the Canada Border Services Agency (CBSA), to obtain Advanced Rulings so they can keep that money. The CBSA’s ability to recover duty drawback payments made to an importer came up CBSA v. Dorel in connection with duty drawback payments made to Dorel on futon covers imported from China and exported to the U.S.  Dorel imported futon covers from China, inserted a futon mattress in the futon cover, punched plastic jiffies through the mattress in a process called “tufting”, closed the zipper on one end of the cover and packaged the covered futon mattress with a metal frame for export to the U.S.  In response to Dorel’s request for a Same Condition Process Ruling, the CBSA issued the “same condition” ruling on September 14, 2011.  The Same Condition Process Ruling allows drawback or deferral of customs duties on goods exported in the “same condition” in which they were imported. Imported goods may undergo certain operations in Canada and still meet the criteria to be considered to be exported in the “same condition” so long as they do not materially alter the characteristics of the good. Dorel was paid drawback of duties paid on the imports on the basis of this “same condition” ruling.  The Federal Court noted that there was no suggestion that Dorel misrepresented its process or that it failed to disclose information when it requested the “same condition” ruling. Dorel did not make false representations to the CBSA or conceal relevant information concerning its process in its Duty Drawback Application.  Dorel did not obtain an advance ruling before importing and exporting the futons, but in the circumstances probably did not consider that an advance ruling was necessary. Following an audit of Dorel’s facility, the CBSA concluded that the product did not qualify for “same condition” treatment.  The CBSA issued a new “same condition” ruling on February 23, 2012 to replace the original ruling.  On the basis of that new ruling,...

Posted by Woods LaFortune LLP on Nov 28, 2014

On November 25, 2014, Minister of International, Trade Ed Fast, issued a statement raising concerns with the U.S.’ attempt to apply Buy American restrictions to a project at the Port of Prince Rupert, British Columbia. The full statement, available at http://www.international.gc.ca/media/comm/news-communiques/2014/11/25a.aspx?lang=eng, reiterates the importance of an integrated economy in North America and highlights the benefits of dismantling trade barriers and eliminating inefficiencies created by protectionist policies. Buy America provisions require that U.S. products and materials be used in transportation infrastructure projects valued over USD$ 100,000.00 so that U.S. mass transit-related projects may only use 100% U.S. steel, iron and manufactured products. The project in question involves the upgrade of the Prince Rupert ferry terminal on British Columbia’s West Coast [the “Prince Rupert Project”].   The Alaska Marine Highway System has exclusive use of the ferry terminal, which services passengers shuttling between Alaska and British Columbia, as part of a 50-year lease agreement between the Alaska Department of Highways and the Prince Rupert Port Authority. The State of Alaska has made it clear that the Prince Rupert Project, valued at approximately USD $15 million and located on Canadian soil, is subject to Buy America. Since funding for the Prince Rupert Project derives from the U.S. Federal Highway Administration, the Project must comply with Buy America provisions.  Bidding documents on the Alaska Department of Transportation’s website also require that all iron and steel used in the Prince Rupert Project must be U.S. made. Consequently, Canadian iron or steel may not be used for this $15 million project in Canada. In the wake of the recent Morrison Colorado South Park Bridge incident, where Canadian steel was used to repair the bridge in violation of the Buy America provisions, there has been a growing debate as to the impact of reciprocal trade provisions on U.S. – Canada economic integration. The Canadian Government is also facing mounting pressure from various stakeholders, such as the Canadian Manufacturers and Exporters (CME) Association to implement retaliatory and reciprocal measures against Buy American provisions to “even out the playing field”. The North American Free Trade Agreement [“NAFTA”] does not address in great detail reciprocity between both countries in the...

Posted by Woods LaFortune LLP on Nov 21, 2014

With approximately $1 trillion in annual bilateral investment and trade, Canada offers many profitable business and/or investment opportunities for U.S. firms, and especially for small and medium size enterprises (SMEs). The Canadian market is a great place to begin exporting given its geographic proximity to the U.S. and the many similarities in business culture between both countries. Despite these similarities on certain levels, the Canadian regulatory landscape is quite complex and can present new exporters with important challenges. There are many key considerations to be taken into account in an export venture, and the sheer volume of documentation and resources available on the topic of exporting to Canada can often be overwhelming and convoluted. In conjunction with the U.S Commercial Service of the U.S. Embassy in Ottawa (http://www.export.gov/canada/), Woods, LaFortune LLP and Shane Brown of Thompson Ahern International (http://www.taco.ca/en/) put on a Webinar as part of the series on the logistics of doing business in Canada on November 12, 2014. Attended by U.S. companies of varying sizes and sectors, the Webinar focused on condensing all the relevant considerations to be mindful of when exporting to Canada. As alluded to by its title “Exporting to Canada: Where Do We Begin?”, the Webinar’s main purpose was to take participants through the ABC’s of exporting to help create a successful business venture in Canada. The presentation, which can be found under our publications section (https://www.wl-tradelaw.com/exporting-to-canadawhere-do-we-begin-webinar-slides/), identifies key trends and opportunities in the Canadian market for U.S. firms. It highlights the need for, and main components of an effective export plan, marketing strategy and market entry strategy for new exporters. It also walks through the important steps and considerations to be taken into account from Duty Deferral Programs, Carriers or Freight Forwarders and Insurance, to Customs and Tariff Classifications, to name a few. Regulatory considerations such as labelling, certifications and standards are also explored, as well as NAFTA’s role and the protections it offers to U.S. companies investing or doing business in Canada. The team behind the Webinar is currently working on completing a checklist for new exporters, to highlight, in a single user-friendly document, all the key considerations and things that need...

Posted by Woods LaFortune LLP on Nov 18, 2014

Canada’s approach to air agreement negotiations involves a search for a careful balancing of the quest for liberalization and a prudential concern for its domestic industry. The airline business is recognized globally for a kind of inherent fragility. The Canadian industry has been no exception with over 100 Canadian carriers, small and large, having gone bankrupt, closed or otherwise merged and consolidated since the dawn of Canada’s air transport industry in the 1920s. Since its creation as a state-owned enterprise in 1936 and following its privatization in 1988 the viability of Air Canada in particular has been an on-going concern of the Canadian government. This concern partially stems from Canada’s wide territory, relatively small and scattered population, and critical reliance on air transport for its own domestic economy and the integration and mutual support of the carrier’s domestic and international networks. Since the integration of Air Canada and Canadian Airlines International in 2001 following the latter’s economic difficulties, the former has been in the unique position in Canada of offering scheduled services on integrated domestic and international networks of significance. While WestJet has grown significantly since its launch in 2006, it might still take many more years and a fleet diversification before it can, like Air Canada, offer integrated networks of comparable size, extent and diversity. From the Government’s viewpoint, exposing Canada’s carriers to full global competition risks undermining Canada’s domestic services and a key part of its own domestic economic infrastructure. In contrast, this is not a concern of major global airlines based in small territories, some without even domestic services, such as Singapore, Qatar or the United Arab Emirates, all known to have pressured Canada to open up its market. It must be noted that many global carriers, such as those operating from the three countries referred to above can benefit from state-ownership status. . This search for balance with a focus on preserving domestic service has had had an effect on policy.  For example, when the Canadian industry was dominated by both Air Canada and Canadian Pacific, the Canadian government went as far as adopting a “division of the world” policy, allocating exclusivity of Canadian carrier...

Posted by Gordon LaFortune on Nov 17, 2014

Investor Statement Dispute Settlement (“ISDS”) is an arbitration process included in many international trade agreements (i.e. NAFTA’s Chapter 11). ISDS allows a foreign business or individual, who has made or is seeking to make an investment in one of the countries that is a Party to such a trade agreement (the “Host Country”), to challenge a measure adopted by the host country if the measure violates investment obligations and detrimentally affects the value of the investment.  The independent and binding third-party arbitration available through ISDS is usually described as an alternative to using the domestic courts of the host country.  In some cases it may be the best and most direct option available to the investor. While their authority must be determined on a case-by-case basis, domestic courts are unlikely to make a direct review and determination, or even consider disputes based on a claim that there has been a violation of international investment obligations such as the National Treatment or the Most Favoured Nation Treatment (“MFN”) obligation.  National Treatment and MFN obligations are included among the investment obligations in most international trade agreements.  MFN requires that foreign investors and their investments receive treatment by the host country that is “no less favourable’ than the treatment it accords, in “like circumstances”, to investors and investments of any non-party. The National Treatment obligation ensures that a host country accords to foreign investors and their investments, treatment that is “no less favourable” than the best treatment it accords to its domestic investors in “like circumstances”. As a result of both the National Treatment and MFN obligations, a foreign investor and its investments in the host country are entitled to the best treatment accorded by that host country to any other investor or investment in like circumstances. The National Treatment and MFN standards apply only to actions taken by the host country’s government that have an impact on a foreign investor and/or their investment in the host country.The treatment accorded to investors and investments is generally set out in legislation, regulation or administrative action and, in most cases, falls squarely within the host government’s domestic legal authority.  Domestic courts usually apply domestic...