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Progress on Can-US Buy American Trade Dispute?
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Although the controversial "Buy American" provisions in the massive U.S. Stimulus Bill continue to be a thorn in the side of Canadian businesses and governments at all levels, there have been recent signs of progress on a possible deal to exempt Canadian manufacturers and exporters from the domestic preference.
News reports that a deal is in the works to exempt Canada from the provision has prompted the Federation of Canadian Municipalities to temporarily withdraw a threat made in June at their AGM that would have blocked U.S. companies from bidding on city contracts.
Under the deal proposed by International Trade Minister Stockwell Day, in exchange for a Buy American waiver, Canada would make its provincial and municipal doors wide open to U.S. companies.
Somewhat ironically, while provincial and local governments have railed against the Buy American provision claiming that it violates the North American Free Trade Agreement, many contend they were partly to blame for the problem in the first place by have previously refused to open up their purchasing markets to the NAFTA rules when the deal was originally negotiated.
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Canada Entering Into Free Trade Talks with Ukraine
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International Trade Minister Stockwell Day recently announced the launch of talks between Canada and Ukraine on a free trade agreement.
"Our government is once again taking action to open doors for Canadian business in new markets," said Day. "Canadian companies are steadily building a deep business presence here in areas like aerospace, communications technologies and in agriculture. Free trade negotiations could help to extend our deepening partnership. We know the support is there -- on both sides."
An FTA with Ukraine could further open markets for Canadian exports ranging from agricultural and seafood products to machinery and pharmaceuticals. It could also help to address non-tariff barriers.
Ukraine is the largest country in Europe, and is home to a highly educated population of 46 million, a diversified industrial base and substantial natural resources. Canadian merchandise exports to Ukraine in 2008 totalled $229.7 million, an 80% increase from the year before and a 400% jump from 2004. In 2008, agricultural and aerospace machinery topped the list of Canadian exports.
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CBP Removes Compliance Date Provisions from Electronic Cargo
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U.S. Customs and Border Protection has issued a final rule that, effective Oct. 14, temporarily removes the compliance date provisions of various sections of the CBP regulations pertaining to mandatory advance electronic transmission of inbound and outbound cargo information.
These provisions were created by a December 2003 final rule that implemented a law mandating the collection of cargo information through a CBP-approved electronic data interchange system before cargo is brought into or departs from the U.S. by any mode of commercial transportation.
Because some carriers were not yet automated (with systems capable of electronic transmission through the appropriate CBP-approved data interchange system) or CBP had to upgrade its system, that rule contained provisions that delayed the date carriers would be required to comply with the mandatory electronic transmission requirements. CBP states that these compliance dates have now all taken effect, rendering the existing compliance date provisions obsolete.
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GHY E-Newsletter Issue #3 October · 2009
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Managing
Risk in Uncertain Times
Companies that import or export can no longer react only "if and when they catch up to us."
With the Canadian dollar on the rise once again and now approaching parity with a weakened U.S. dollar, the cost of importing components and finished goods is a more attractive prospect than ever before. At the same time however, the upward shift in exchange makes life even more difficult for manufacturers and other companies that export to the United States or sell goods on world markets.
In either case, the commercial challenges posed by managing transborder or global supply chains can be formidable in light of the currency issues alone, but when you add to that all of the other complex cost factors and the inherent financial uncertainty associated with trading in the present climate of worldwide economic recession, the cumulative risks involved are more significant now than ever before.
Further complicating matters, Customs agencies in both Canada and the U.S. have been increasingly compelled by their respective governments to enforce tough new border security programs cracking down with "zero-tolerance" on carriers and traders alike, demanding they be in full compliance with all applicable regulations or face stiff penalties for infractions otherwise. All of which can translate into major costs, not only in terms of fines levied but even the withdrawal of expedited border crossing privileges. Companies that import or export can no longer simply ignore the rules or react only "if and when they catch up to us."
In terms of the aggressive new customs compliance regime, by far and away, the most significant area of exposure for importers is that of improper tariff classification -- something determined not just through our own extensive audit experience, but corroborated by recent CBSA reports detailing infractions under the Administrative Monetary Penalty System (AMPS).
The consequences can be significant. Here in Canada, for example, where goods deemed by CBSA in an audit to have been incorrectly classified trigger an expectation that the importer must identify all past imports of that item over the past 1 year in the case of an initial audit, and up to a maximum of 4 years in the case of second audit, for which a $100 per incidence fine will applied to a $25,000 maximum per audit. In addition, the importer will be forced to bear the cost of gathering and reporting the information, or most likely, engaging their Customs Broker to do so, and to file amending entries or a comprehensive blanket amendment to satisfy CBSA.
What's the bottom line for Canadian traders?
In an environment of unprecedented risk and uncertainty it's more important than ever for them to be proactive in establishing a systematic approach to managing Customs compliance, and to protect themselves from onerous and unexpected commercial exposure of retroactive penalties and the cost of corrective action. GHY can help you to put together a plan that prioritizes your risks within a commercial framework that matches your comfort with exposure to a Customs audit, or if you have already been audited, subsequent verification reviews. Contact Al Dewar for more information, dewar@ghy.com, (204) 947-6700 ext. 215. |
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COOL Dispute Goes to WTO
U.S. Officials Respond to Canadian Panel Request Regarding Country-of-Origin Labeling
Agriculture Secretary Tom Vilsack and United States Trade Representative Ron Kirk last week issued a statement regarding Canada's request to establish a dispute settlement panel at the World Trade Organization (WTO) to review their claims in a dispute regarding country of origin labeling (COOL) required by the 2008 Farm Bill for certain agricultural products. The panel request will be considered at the October 23, 2009, meeting of the WTO's Dispute Settlement Body.
"We regret that formal consultations have not been successful in resolving Canada's concerns over country of origin labeling (COOL) required by the 2008 Farm Bill for certain agricultural products," said the statement from Secretary Vilsack and Ambassador Kirk.
"We believe that our implementation of COOL provides information to consumers in a manner consistent with our World Trade Organization commitments.
"Countries have agreed since long before the existence of the WTO that country of origin labeling is a legitimate policy. It is common for other countries to require that goods be labeled as to their origin.
"We hope to continue to work with Canada to resolve this issue amicably."
Background:
The Food,
Conservation and Energy Act of 2008 (the 2008 Farm Bill) mandates
country-of-origin labeling (COOL) at the retail level for beef, lamb, pork, chicken, goat,
perishable agricultural commodities, and certain nuts as of September
30, 2008.
The statute sets out four categories of country of origin for meat: A)
exclusively U.S. origin; B) multiple countries of
origin; C) animals imported for immediate slaughter; and D) exclusively foreign
origin.
Canada initially requested WTO consultations with the U.S. on COOL in December 2008, as it believed the measures were creating undue trade restrictions, to the detriment of Canadian exporters. At that time, U.S. provisions were being implemented on an interim basis.
A Final Rule to implement COOL was published in the U.S. Federal Register on January 15, 2009. However, on February 20, 2009, the U.S. Secretary of Agriculture issued an open letter to the U.S. industry, encouraging the use of stricter and broader labelling practices. According to Canadian industry representatives, those proposals will only add to the challenges they are already experiencing. They have observed that, since COOL came into effect, some U.S. processors are choosing not to buy Canadian animals, or are trying to buy them at a reduced price.
Additional
information about the long-running dispute over COOL can be found on our Tradelines
website here.
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New Chief for Customs and Border Protection
President Obama plans to nominate Alan Bersin, presently Homeland Security Secretary Janet Napolitano's adviser for U.S.-Mexico border issues, to be commissioner of U.S. Customs and Border Protection.
Earlier this month, administration officials notified members of Congress of the plan to shift Bersin from his role as the administration's border czar to CBP commissioner. Bersin will remain in the Homeland Security Department, but his new assignment unlike his current post requires Senate confirmation.
Much of Bersin's experience has been dealing with law enforcement issues between the United States and Mexico, a fact that may not bode well for Canadian traders in terms of the so-called thickening of the northern border that many stakeholders in the trade community consider a detrimental impediment to commerce; one being driven by concerns about an entirely different set of security problems along the southern border.
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Food Inspection Agency Announces New Import Service Centre
Services to be consolidated in Toronto by July 2010
The Canadian Food Inspection Agency (CFIA) is modernizing its import control processes by consolidating its three import service centres (ISC) in Montreal, Toronto and Vancouver into one National Import Service Centre (NISC), to be located in Toronto.
Officially launched on October 5, 2009, the NISC is expected to be fully functional by July 15, 2010. In the interim, the trade community will continue to conduct business with the existing ISCs in Montreal Toronto and Vancouver.
CFIA will continue to provide front-line screening to ensure that imported products meet Canadian requirements in terms of regulatory compliance to ensure the safety of food and agricultural commodities imported into Canada.
According to the CFIA, the creation of a National Import Service Centre will provide "enhanced services" including:
· A single window for issues related to import transactions and documentation
· Increased bilingual service to 24 hours, seven days a week from the existing 20 hours, seven days a week
· Increased consistency in the review of import documentation and verification of import admissibility
· Improved alignment with the services delivered by the Canada Border Services Agency (CBSA)
The CFIA intends to minimize disruption to its clients during the transition and will be providing updates to stakeholders as work progresses. It should be noted that the NISC won't be offering 24/7 services until the new centre is fully-operational and staffed by the expected date of July, 2010.
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CTA Takes Aim at Proposed USDA APHIS Fee Hikes
A proposed 14% increase to the fees charged by the US Animal and Plant Health Inspection Service (APHIS) has angered the Canadian Trucking Alliance, which referred to both the fee hike and the rationale for the increase as "ludicrous."
 Under the proposal, commercial truck user fees will go from US$5.25 to $6 per trip and the commercial truck transponders will rise in cost from US$105 per year to $120.
Initially slated to kick in October 1, the fee increase has been delayed until November 1. The U.S. is justifying the fee increases by saying they're necessary to offset lost revenue due to declining border traffic. It would mark the first fee hike since 2005, the U.S. points out.
"Introducing APHIS fees in the first place on all trucks entering the United States whether they are carrying agricultural products or not was nothing but a cash grab," countered CTA chief David Bradley.
"To acknowledge that trade is down, you would think that the folks at APHIS might have also acknowledged that this is a reflection of the recession and the impact of the thickening of the border for legitimate trade," added Bradley. "Instead they increase their fees; incredible."
Bradley is urging the rest of the trade community to join CTA in opposing the fee increases.
APHIS officials will be holding a public meeting to discuss the agricultural quarantine and inspection (AQI) user fee increases. The meeting will take place on Oct. 15 at the USDA Center in Maryland. APHIS will also continue to accept public comments until Nov. 27.
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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 this
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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