Anyone following the news knows that Russia is now the world’s most sanctioned country and that the sanctions are intended to cause Russia so much economic pain that it will withdraw from Ukraine. Canada has joined other countries in imposing sanctions on Russia and Russians under the Special Economic Measures Act, the Customs Tariff, and the Export and Import Permits Act and has indicated that it will impose more sanctions if necessary.[1] In addition to the political objective of Russian withdrawal from Ukraine, the sanctions have also affected business by either prohibiting the business outright or by increasing the cost of doing business. Thus, sanctions may affect Canadians or Canadian companies that do business with Russia or Russians depending on the nature of that business. Because some traders may try to get around the sanctions, Canadians and Canadian companies may find themselves unintentionally violating the sanctions by importing Russian goods or by unintentionally doing business with Russian companies or individuals. Regardless of their objective, the sanctions pose a business risk for Canadians and Canadian companies that should not be ignored. To reduce or eliminate that risk, any Canadian or Canadian company doing business in Russia or with Russians or intending to do business in Russia or with Russians, should take steps to understand their exposure to the sanctions. To do this, we suggest the following: i) Review the sanctions to determine whether they could affect your current or planned business with Russia or with Russians. A brief overview of Canada’s sanctions in place at the time of writing, including the penalties for violating those sanctions and potential for continuing business despite the sanctions, is discussed in the attached Annex. ii) Review your business operations to determine whether you are currently doing business in Russia or conducting business that involves Russian goods, investment, financing, banking transactions, or transportation more broadly to determine whether that business could violate the sanctions. iii) Review your operations or business in other countries to determine whether they have any connections with Russia or Russians that could trigger penalties under Canadian sanctions or sanctions that may be imposed by that other country. iv) Consider your practices...
Read MoreCanada should consider the Economic Impact of Imposing AD/CV Duties on Imports and should start with OCTG
Canadian practice has been to consider Anti-dumping/Countervailing measures (AD/CV) measures exclusively from the perspective of the domestic industry that filed the dumping complaint and ensure that any injury to this industry is offset using AD/CV duties. However, this approach does not necessarily take the best interests of the Canadian economy as a whole into consideration. That practice should stop and Oil Country Tubular Goods (OCTG) is the product that calls out for this change. The Canadian International Trade Tribunal (CITT) recently started two Expiry Reviews into AD/CV Orders against OCTG.[1] The purpose of these Reviews is to determine whether the existing Orders should be allowed to expire or be extended for a further five years. If extended, OCTG imported from China, Chinese Taipei, India, Indonesia, the Philippines, Korea, Thailand, Turkey, Ukraine and Vietnam will continue to be subject to AD/CV duties for a further five years, increasing their price in Canada. The Canadian AD/CV system favours domestic producers because the only question before the CITT in an AD/CV Inquiry is injury to the domestic industry. In an AD/CV Inquiry, the Canada Border Services Agency (CBSA) determines whether the imported goods that are the subject of an AD/CV complaint are dumped and/or subsidized and determines the margin of dumping and subsidization. The CITT separately determines whether the imported goods have caused or threaten to cause injury to the domestic producers, but the CITT does not determine the level AD/CV duties required to offset that injury or threat of injury. Instead, AD/CV duties are applied to imported goods based on the rates established by the CBSA. The same thing happens in Expiry Reviews. The amount of AD/CV duties required to offset the injury, or whether it is in Canada’s best interests to impose duties in any amount is not considered. Since AD/CV duties are set based on the margins established by the CBSA, it is possible if not likely that the AD/CV duties applied to the imported goods will exceed the amounts actually required to offset the injury or threat of injury found. In this case, the domestic producers will have more protection than required while Canadian stakeholders who purchase and...
Read MoreProving FTA preferential tariff eligibility: The evidentiary burden in Canada
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,...
Read MoreSteel Safeguards: The First Test of Canada’s Membership in the Alliance for Multilateralism
The Government’s response to the Canadian International Trade Tribunal’s (“CITT”) decision in Steel Safeguards will be Canada’s first test as a new member of the France – Germany coalition to support international cooperation and a rules-based world trading system. Will Canada support international trade rules or will it give in to pressure from the Canada Steel Producers Association (“CSPA”) and impose safeguard measures on imported steel products in violation of those rules? On April 3, 2019, the CITT concluded its safeguard inquiry into seven steel products, finding that imports of heavy plate and stainless steel wire caused serious injury to domestic producers while concrete reinforcing bar, energy tubular products, hot-rolled steel, pre-painted steel and wire rod did not. Based on those findings, the CITT recommended that the Minister of Finance impose safeguard measures on imports of heavy plate and stainless steel wire, but declined to make any remedy recommendation for the other products. The Minister is now considering the CITT’s recommendations on heavy plate and stainless steel wire and has indicated that the provisional safeguard measures currently imposed on the remaining products will be lifted on April 28, 2019 and any surtaxes that have been paid will be returned. Safeguards is a mechanism used to protect domestic producers from a surge in imports of fairly-traded goods from all sources. Permanent safeguard measures can only be imposed following a CITT inquiry that finds that goods were being imported into Canada in increased quantities and under conditions that cause or threaten to cause serious injury to domestic producers of like or directly competitive goods. If the CITT finds serious injury, it can recommend that the Minister impose safeguard measures, in the form of a surtax, an import restriction or both, to restrict imports. The CITT’s recommendation is non-binding; the Minister can ignore, impose or amend the CITT’s recommendation as he sees fit in the circumstances. However, the CITT’s no injury finding is binding; the Minister cannot ignore a no injury finding and impose safeguard measures regardless without violating Canadian and international law. Since the CITT concluded its inquiry, the CSPA has lobbied the Canadian government asking that it impose safeguard measures...
Read MoreNAFTA is dead! Long live NAFTA!
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...
Read MoreNegotiation, Not Litigation is the Way to NAFTA Modernization
Rather than just negotiate NAFTA modernization, the United States is trying to use additional illegal tariffs on steel and aluminum, and now WTO litigation, to force Canada to accept its NAFTA position. The additional tariffs on Canadian aluminum and steel are illegal because they exceed the U.S. WTO and NAFTA bound duty rates (i.e., the highest duty agreed between the Parties) and, thus, violate those Agreements. Canada retaliated against these U.S. tariffs with its own “dollar-for-dollar” tariffs on U.S. imports to rebalance the concessions made in the WTO and NAFTA Agreements which the U.S. additional tariffs have upset. Canada has also challenged the U.S. decision to impose these additional tariffs at the WTO. The U.S. has responded with its own request for WTO Dispute Settlement against Canada’s retaliatory duties. However, the U.S. litigation is futile because the possibility of outright U.S. success is so slim that even a U.S. win would result in any change in Canada’s tariffs. At the end of this process, the parties will be no further ahead and both will be hurt by this “tit-for-tat” protectionism. The current U.S. approach to trade appears to be based on the erroneous view that the WTO guarantees equality of outcome rather than equality of opportunities. This error seems to be why the U.S. Administration focuses on trade flows as a measure of success with trade deficits as evidence of unbalanced trade. However, the WTO, like all other trade agreements, does not guarantee that exporters or importer will engage in international trade or that they will make a profit. Instead, trade agreements aim to liberalize trade between the Parties by reducing barriers to trade. This trade liberalization is reflected in reduced tariff barriers between the partners and controls on non-tariff barriers that could be erected in their place. Trade liberalization does not mean that all tariffs will be reduced to zero, although that may be an outcome. Trade liberalization simply moves the parties in that direction through negotiation. For example, the U.S. claim that Canada has high tariffs of up to 275% on some dairy products is correct. The U.S. also has high tariffs, such as 350% duties on...
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