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Canada-U.S. Organic Products Certification
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The world's first so-called "equivalency agreement" for the organic industry took effect on June 30, 2009.
Under the new agreement, between the U.S. Department of Agriculture and the Canadian Food Inspection Agency, the U.S. and Canada will accept each others labelling of certified organic products exported between the two countries. Products certified as meeting USDA standards will not have to be re-certified by the CFIA for export into Canada, and vice-versa.
A List of Certification Bodies accredited by the CFIA is available here and a List of Conformity Verification Bodies is here. Information about the USDA's National Organic Program is available here.
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Free Trade Agreement with Peru Opens Doors to Latin America
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On
June 18, International Trade Minister Stockwell Day announced that
legislation to implement Canada's free trade agreement with Peru has
been adopted by Parliament and received Royal Assent. Day said the
agreement will provide benefits to Canadian companies by eliminating
tariffs on goods, promoting two-way investment and expanding access for
Canadian companies in this key market.
"Ensuring free and open
trade is vital to the international effort against the global
recession. Canadians can count on our government to oppose
protectionism and defend free and open trade on the world stage," said
Day. "This agreement with Peru will provide opportunities for Canadian
companies looking to expand their business into Latin America. It will
open new doors in key sectors such as extractive industries,
manufacturing, agriculture and financial services - all areas in which
Canadians have extensive expertise."
Canadian producers will
benefit from the elimination of tariffs on exports into Peru. Many
agricultural exports such as wheat, barley, lentils and peas will enjoy
immediate duty-free access.
In 2008, two-way merchandise trade
between Canada and Peru totalled more than $2.8 billion, with hundreds
of Canadian companies doing business with Peru. Peru is also a
strategic destination for Canadian direct investment (mining and
financial services).
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Canada, Jordan Sign Free Trade Agreement
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Canada has inked a free trade pact with Jordan that will lift duties on Canadian exports to the Arab nation.
Trade Minister Stockwell Day and his Jordanian counterpart signed the agreement last week in Jordan's capital, Amman.
Canada's
forestry, manufacturing and agriculture sectors are expected to benefit
from duty-free access. In return, Canada will give the Mideast country
preferential trade conditions, including full exemption from customs
duties for Jordanian goods. The deal is expected to be ratified by both
parliaments later this year.
Bilateral trade stood at about $92.2 million in 2008, according to a news release from Canadian government.
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Canada-EFTA Free Trade Agreement Becomes Operational
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The free trade agreement between Canada and member states of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland) entered into force on July 1, 2009.
CEFTAAccording to Department of Foreign Affairs and International Trade, the Canada-European Free Trade Association Free Trade Agreement (CEFTA), which is primarily focused on trade in goods, has the potential to yield significant benefits for manufacturers and exporters in all five participating countries by providing new links between European and North-American supply and value chains.
Two-way merchandise trade between the EFTA states and Canada amounted to 9.8 billion USD in 2008, with imports reaching $6.1 billion and exports $3.7 billion. This made Canada EFTA's fifth largest trading partner, while EFTA represented Canada's eighth largest export destination.
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Toward a Better Border
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Enhanced mobility at congested border crossings could speed an economic
recovery, boosting the automotive sector in particular says a report released earlier
this month by a U.S.
think-tank.
The report, authored by Chris Sands of the Hudson Institute and commissioned
by the Brookings Institution, is critical of the "one-size-fits-all" security
approach embraced by the U.S.
following 9/11 and urges Washington
to adopt a more decentralized process for addressing the varied and diverse
challenges faced at the border.
"The unfortunate reality is that the border today remains a source of
considerable user frustration and economic drag," says the report.
"Progress requires taking greater account of the variety of ways in which
the border is used by different categories of users in different places."
The report identifies four
geographically distinct corridors or "gateways" along the U.S.-Canada border:
the Cascadian gateway in the Pacific Northwest, the Great Lakes gateway in the Midwest, the extensive Rural gateway in less populated areas, and the
continent spanning Perimeter gateway. "Each requires a different mix of
technology and infrastructure to respond to unique regional conditions," the
report contends.
Included in the
recommendations are: the creation of a state-level Homeland Security Network;
implementation of the "Smart Border Action Plan" on a local level; funding for a
Border Security Pilot Project Challenge Fund to test new ideas; and the
establishment of a cross-border Joint Infrastructure Planning Commission.
The executive summary with links to the complete report is
available on our Tradelines website here.
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GHY E-Newsletter Issue #2 Sept. · 2009
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International Sourcing Strategies
Taking a proactive approach to the implications of offshore sourcing helps protect your bottom line
Many North American manufacturers are finding it increasingly challenging to deal with a growing influx of imported materials and products originating from off shore competitors, especially those based in China and India.
These competitive pressures are compelling Canadian and US companies to consider various measures to protect market share, including shifting their sourcing arrangements for components, peripherals and finished products outside of North America, to take advantage of lower cost alternatives originating in the emerging economies of Asia, Eastern Europe and South America.
The purpose of this trade Bulletin is to highlight the importance of doing the appropriate research and background checks of all the cost and regulatory elements BEFORE you commit to buying components or finished goods from new off shore vendors.
Why is this more important than ever?
Because North American manufacturers have traditionally sourced most of their materials in the US., Canada or Mexico, where duty is generally not an issue as the majority of the goods are NAFTA qualifying, and Customs and regulatory issues are well documented and understood.
These assumptions can't be taken for granted when sourcing goods outside North America. Canadian and US importers are encouraged to review the full spectrum of variables, including currency exchange ratios, marking and packaging requirements, duty rates and tariff treatment, anti-dumping/countervailing duty applicability, duty drawback eligibility, and NAFTA eligibility, if the offshore components are incorporated into products ultimately sold in Canada or the US.
For example, purchasing motors in China that are incorporated into machines you manufacture in Canada for sale to a customer in the US, may negate the finished product's NAFTA eligibility and duty free status, thereby increasing the ultimate cost of the product, and possibly eroding your margin or forcing you to raise your retail price and risking your competitive position.
Conversely, if you purchase the motors from China and sell them to a US customer in the same condition and without modification, you may be eligible to recover all Canadian duties paid at time of import under the Duty Drawback program. Of course you will need to assess all the trade offs to arrive at a bottom line comparison that takes all the factors into consideration, and gives you an "apples to apples" view of the offshore versus North American sourcing options.
Taking a proactive approach to studying the implications of off shore sourcing can confirm that you will achieve the desired competitive cost advantage, help you avoid unexpected costs or surprises, and minimize the probability of unexpected regulatory issues with Canada Border Services Agency or United States Customs and Border Protection.
For more information or assistance, contact Bob Cowie, Vice President of Canada/US Consulting at 204-947-6700 ext 237, bob@ghy.com. |
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Importer
Security Filing (ISF) Penalty & Mitigation Guidelines
As part of its outreach to
the trading community, the U.S. Customs and Border Protection Agency (CBP) briefed
the National Customs Brokers and Forwarders Association of America (NCBFAA) last
month about details of the Importer Security Filing (ISF or so-called "10+2")
 penalties and mitigation guidelines that are expected to be published shortly in the
Federal Register.
The NCBFAA has provided the following
summary of these latest ISF developments to help ensure that importers and
filers are fully aware of these new requirements.
Circumstances
Initiating a Liquidated Damages Case:
There are four situations that may initiate the issuance of liquidated damages:
the importers' failure to file an ISF as required by law; a late submission; an
inaccurate submission; and the failure to withdraw a filing. Where law
enforcement goals are clearly compromised, such as smuggling attempts,
fraudulent activities, terrorist activities, and other actions clearly contrary
to law, importers can expect to receive no consideration of circumstances for
mitigation.
Failure to File an
ISF:
CBP indicates that they may choose one of several paths for those shipments
where there is a complete failure to file an ISF: the issuance of a Do Not Load
(DNL) message to the carrier at the foreign port of lading; withholding
permission issued to the carrier to unload the subject goods at the first U.S.
port of arrival; delay in issuing permission to unload at the first U.S. port
of arrival; issuance of a seizure notification; withholding Customs release of
the goods allowing the goods to move to General Order (G.O.); and the issuance
of a liquidated damages case.
Inaccurate
Submission of Information on an ISF:
A liquidated damages case will be issued in the amount of $5,000.
In this area CBP has
clearly attempted to allay fears by indicating that they will take into
consideration how and from whom the ISF importer obtained the information for
use in the ISF and the importer's ability to commercially verify the
information received.
CBP will continue to allow parties to present information
that they believe to be reasonably true at the time of filing, and will
continue to be flexible as long as the importer is able to demonstrate that it
has taken measures to verify the information to the extent commercially
possible. Additionally, CBP acknowledges that some data is beyond the control
of the importer, such as rolled bookings and vessel diversions. In those cases
CBP will take these factors into account when issuing liquidated damages cases.
If there are successive
filings of the ISF data to perfect or correct the data transmitted, CBP will
consider only the filing closest to the allowed filing timeframe, which
is typically the last ISF filed, for the purposes of issuance of liquidated
damages. This clearly indicates that there will not be a per transmission
penalty issuance. CBP also acknowledges that data may change somewhat during
the transaction itself, and that the correction process is designed to allow
for reporting of changed information prior to arrival in the U.S.
Late Submission
of an ISF:
A liquidated damages case will be issued in the amount of $5,000.
As CBP expected, the
phase-in period has demonstrated several commercial challenges in obtaining all
of the information required in a timely manner. CBP indicates that they will be
fair in evaluating the timeliness of the filing and will continue to work with
those parties who have participated in the process to date. The filing of
provisional data is always an option for importers and by only utilizing the
filing closest to the timeline of filing for the issuance of liquidated
damages, CBP encourages all importers to file data based on that which is
commercially available to meet the timelines.
Failure to
Withdraw a Filing:
A liquidated damages case will be issued in the amount of $5,000.
CBP has indicated that it is important that importers and filers withdraw an
ISF when it is known to be invalid. This may be a result of the cancellation of
an order, the discovery of a significant change in the information
necessitating a new ISF filing, a complete change in routing, or for other
commercial reasons.
Mitigation Amounts:
There is a possibility of a total of $10,000 in liquidated damages per ISF
filing.
These may be mitigated based on several factors. For the first
violation, CBP may cancel the liquidated damages case for the payment of $1,000
- $2,000. For second and subsequent violations, CBP may cancel the liquidated
damages case for the payment of $2,500.
Mitigation Factors:
CBP will outline six mitigation factors for use in determining cancellation of
liquidated damages cases. A summary is provided below:
1) Evidence of
progress in implementing ISF compliance during the phase-in period.
2) The number
of ISFs compared with the number of violations.
3) C-TPAT Tier
3 and Tier 2 importers will receive consideration of up to 50 percent
mitigation for violations.
4) The
importer has demonstrated that remedial actions have been taken to address the
circumstances surrounding the violation.
5) Inaccurate
filings due to circumstances beyond the importer's control, such as vessel
diversions and rolling bookings completely due to carrier actions.
6) Receiving
incorrect information from another party in the supply chain, if this
information is found to be incorrect at a date later than allowed under the
correction timeline. Under certain circumstances the liquidated damages may be
canceled without payment.
Aggravating
Factors:
There are four aggravating factors that will be outlined in the guidelines. A
summary is provided below:
1) The lack of
cooperation with CBP.
2) Smuggling
attempts and other actions contrary to law in association with the shipment.
3) Multiple
errors on one ISF.
4) A rising
error rate calculated over all ISFs.
Bond Guidelines:
Bond Guidelines are still being worked on internally at CBP and are expected to
be issued a few weeks after the mitigation guidelines. While the mitigation
guidelines do spell out a likely limit of liability in that there is a possible
total of $10,000 in liquidated damages that may be issued, the Single
Transaction Bond process and the ISF stand alone continuous bond limit of
liability is expected to be fully outlined in the Bond Guidelines.
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Administrative Monetary Penalty System Statistics Released
Importers account for 74% of all AMPS contravention volumes and 59% of penalty amounts
The
CBSA has released statistics related to the monitoring of the AMPS
program. The first of these national statistics cover the calendar
years 2006-2008.
These
statistics do not include penalties that were cancelled, nor do they
include contravention C244, a warning penalty for CSA clients. In future however, CBSA advises that the statistics will include the number of cancelled penalties.
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AMPS penalties account for one tenth of one percent (.1%) of all
release requests. When courier shipments and exports are factored in,
the percentage of AMPS contraventions is .03% of the total.
· Importers
account for 74% of all AMPS contravention volumes and 59% of penalty
amounts. First level penalties account for 83% while third level
penalties account for 8%.
· The majority of third level importer penalties were for the following contraventions:
· C315 Failure to provide export permit (32%)
· C336 Failure to pay duties on accounted goods (31%)
· C005 Providing incomplete or inaccurate information (14%)
· C348 Providing false information (10%)
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Carriers account for 21% of all AMPS contraventions and 30% of penalty
amounts. First level penalties account for 82% while third level
penalties account for 13%.
· The majority of third level carrier penalties were for the following contraventions:
· C358 Unauthorized removal of goods from a warehouse (31%)
· C005 Providing incomplete or inaccurate information (27%)
· The
majority of carrier clients receiving AMPS contraventions move their
product via truck transport. This type of carrier represents 62% of
AMPS contravention volumes and 66% of penalty amounts.
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Couriers account for 4% of all AMPS contraventions and 9% of all
penalty amounts. First level penalties account for 36% while third
level penalties account for 58%.
· The majority of third level courier penalties were for the following contraventions:
· C358 Unauthorized removal of goods from a warehouse (84%)
· C026 Person failed to present, open, unpack or unload goods for officer (8%)
· Warehouse
Operators account for 5% of all AMPS contraventions and 11% of penalty
amounts. First level penalties account for 51% while third level
penalties account for 34%.
· The majority of third level
warehouse penalties were for contravention C358, "Unauthorized movement
of goods from a warehouse" (41%).
Appeals:
12% of all AMPS penalties issued were appealed, 4% successfully. Of
those appealed, Recourse Directorate upheld 69%, and cancelled or
administratively closed 30%.
· The reasons for cancelling penalties were:
· The enforcement action was not warranted or justified (97%)
· The incorrect allegation was used by the issuing officer (2%)
· The penalty was not in accordance with Agency policies or guidelines (1%).
Penalties
that are administrative closed are those that are not pursued, for
example, the importer may decide to withdraw his appeal.
Front-end
or border related contraventions account for 73% of all contraventions
volumes and 91% of penalty amounts. Back-end or trade related
contraventions account for 27% of all contravention volumes and 9% of
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CBSA Gets Go-Ahead for eManifest
Final stage of the ACI program is now on track, but questions remain about its implementation
Recent amendments to the Customs Act contained in Bill S-2 provide the required legislative foundation for eManifest, the third phase of the Advance Commercial Information (ACI) program for electronic pre-arrival data provided to Canada Border Services Agency (CBSA) that have already been in force for overseas marine cargo (April, 2004) and for air cargo (June, 2006). The new legislative changes received Royal Assent late last month after having already passed in both houses of parliament.
 Full implementation of eManifest will change the commercial import process by reflecting the CBSA's integrated risk management approach, a comprehensive border security approach designed to keep pace with the changing global environment. As a result of eManifest, all commercial trade chain members will eventually be required to electronically submit trade information in advance of their shipment's arrival in Canada.
Foremost amongst the outstanding concerns that have yet to be resolved as ACI moves into its final stage is the requirement for provision of so-called Importer Admissibility Data (IAD).
IAD would involve importers having to report: seller names and address (and exporter name and address if different from seller); importer numbers, name, address; purchaser name, address; consignee number, name, address; country/state of origin; country/state of export; commodity HS (harmonized system) code. The industry believes the commodity tariff code requirement in particular is overly burdensome and complicated to fulfill.
Many companies within the trading community are opposed to any form of mandatory IAD for transportation modes other than marine.
Although CBSA officials have indicated a willingness to engage in constructive discussions with stakeholders regarding this and other problematic aspects of the eManifest program, it has also clearly signaled that all data elements deemed essential to meeting the agency's border security and integrated risk management objectives must be retained.
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 Finding time to follow the latest international trade
developments and programs of Customs agencies on both sides of the border
relevant to your business can be challenging, so we hope you find the July
issue of our Tradelines e-newsletter to be a helpful resource in this respect. As
always, we'd greatly appreciate any opinions, comments and suggestions you may
have to help us improve this information resource, so please don't hesitate to
let us know what you think.
And if you haven't already, we'd like to take this opportunity to invite you to
check out our Tradelines E-News weblog where you can
find current stories updated daily about business events and developments that
are important to Canadian importers and exporters. Sign up for our RSS feed and
get automatic updates to your favourite reader as soon as they're posted.
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