Canada’s international trade law regulates the import and export of goods, the manner in which these goods are procured or sold, and the protection of foreign investments in Canada and Canadian investments abroad. Most of the applicable laws and regulations are administered by the Canada Border Services Agency (CBSA) and the Department of Foreign Affairs and International Trade. The CBSA has responsibility for administering the customs laws as well as a host of product regulations at the border.
International Trade Law
Canada’s international trade law is generally administrative in nature. Federal government officials administer these laws. Their decisions are subject either to judicial review by the Federal Court or to appeal before administrative tribunals and then to the Federal Court. In exceptional cases, the Supreme Court of Canada hears appeals from the Federal Court.
For the most part, Canada’s international trade laws are based on (or incorporate) Canada’s international treaty obligations. To the extent that the applicable international treaty so provides, disputes may also be brought before dispute resolution panels such as those established by the World Trade Organization (WTO). Similarly, investment disputes under investment treaties may be arbitrated before dispute panels appointed by the parties to the dispute pursuant to the applicable treaty and international arbitration rules.
Counsel advising companies in cross-border commercial transactions must integrate intimate familiarity with business objectives and a thorough understanding of the impact of international trade laws to facilitate the attainment of those objectives. This includes structuring transactions to secure effective market access while ensuring import duty, tax and regulatory efficiencies. Close co-operation with expert counsel and client personnel in other specialized areas such as tax, intellectual property and commercial law is essential to address overlapping legal obligations and optimize business results.
Customs and Border Administration
Canadian customs laws govern the application of customs duty, commodity tax, interest and penalties in respect of imported goods by reference to their values including transfer prices, tariff classification, origin and applicable tariff preferences. Customs valuation establishes the base on which duty and, indirectly, commodity taxes are applied to imports. Tariff classification involves a technical analysis of the nature and use of goods and the interpretation of an international harmonized classification system of potentially applicable descriptions, together with the application of special interpretative rules.
Tariff classification and tariff treatment establish the amount of duty and commodity taxes that are payable for imports into Canada. Tariff treatment involves the interpretation of special rules of origin that establish whether or not goods originate from a particular Canadian treaty partner and are therefore eligible for a reduced rate of duty. In the case of import transactions between affiliated entities, it is essential to consider the transfer pricing aspects of income taxation and to adopt a unified approach to minimize the aggregate exposure to customs duties, commodity tax and income tax. All of these issues impact import tax planning and structuring, and may be the subject of disputes.
Export Controls and Sanctions
Canadian exports are subject to export controls governing military, dual-use and other categories of products; country-specific trade sanctions, restrictions and exemptions; and anti-circumvention laws affecting Canadian exports of U.S. origin goods. Canada also regulates international trade in energy goods such as oil, gas and electricity. In addition, Canada maintains claw-back laws that prohibit compliance with certain foreign extraterritorial measures, notably the U.S. Cuba embargo. These laws can place Canadian subsidiaries of foreign companies in a conflicted position with respect to their obligation to comply with Canadian and home country laws.
Companies that export from Canada must determine early on in their business planning whether their products are subject to export controls; if so, they need to consult expert counsel to help them design and implement tailored compliance programs and procedures to avoid export control contraventions and minimize compliance costs.
Foreign Corrupt Practices
Companies doing business across borders are potentially subject to the foreign corrupt practices laws of Canada and other jurisdictions. These laws prohibit the payment of bribes and other inducements to government officials to obtain a business advantage. Canadian enforcement of foreign corrupt practices laws has increased significantly since the establishment of a dedicated International Anti-Corruption Unit of the Royal Canadian Mounted Police (RCMP) in 2007.
The RCMP is pursuing a growing number of criminal investigations in this area, including mutual legal assistance proceedings in co-operation with the U.S. Justice Department and other countries’ enforcement agencies. Search warrants have been executed against several companies and individuals in Canada in foreign corrupt practices investigations. As a result of increasing enforcement activity in this area, international businesses must be diligent in ensuring that their international operations are executed in a compliant manner. Securing the advice of experienced counsel familiar with international best practices as well as Canada’s enforcement agencies and investigative procedures is essential to minimize legal exposure.
As a signatory to the WTO, Canada has adopted anti-dumping, anti-subsidy and safeguard measures to protect its domestic industries against imports of unfairly traded goods. Trade remedy cases involve two types of investigations. The CBSA investigates whether imported goods are unfairly priced or subsidized in anti-dumping and countervailing duty cases, while the Canadian International Trade Tribunal holds an inquiry to determine whether the imports have injured domestic production. These investigations and inquiries are conducted within very short time frames and following complex rules. Cases are often initiated with little merit, but with the objective of burdening exporters and importers with the imposition of preliminary duties and the cost of defending a case. The assistance of experienced trade counsel in these cases is essential to attaining a favourable result.
Canada has concluded foreign investment protection agreements with more than 20 countries that safeguard Canadian investments abroad and foreign investments in Canada. Investment disputes may be initiated by investors for various causes such as expropriation or failure to treat foreign investments in a manner that is consistent with national treatment (i.e., treatment equal to that accorded domestic companies). Dispute settlement takes place before arbitration tribunals appointed jointly by the investor and the defending government. Tribunals may issue damage awards against offending governments which are enforceable under international law. Companies that encounter discriminatory or arbitrary treatment by the host government in countries where they invest should consult expert counsel early on to familiarize themselves with their rights as investors and to avoid inadvertent waiver of those rights.
International Trade Policy and Negotiations
Canada participates in international trade negotiations bilaterally with numerous partners (e.g., the U.S., E.U., India and Japan) and multilaterally in fora such as the WTO. Canada seeks to advance the interest of its citizens and their international trade and investments by negotiating treaties covering trade in goods, services and intellectual property. The domestic laws, regulations and policies of Canada and its trading partners are required to comply with treaty obligations. International trade and investment treaties open new markets and play an important role in the international trade and regulatory environment for companies doing business in Canada. Companies actively engaged in international trade should consult expert counsel familiar with both the nuts and bolts of trade laws and the machinery of international negotiations to advance their interests in trade negotiations.
Product Regulation and Standards
Goods imported into Canada must meet federal and provincial product standards; consumer product safety regulations; marketing, packaging and labeling requirements; and other product regulations. These laws apply equally to imports and domestically produced goods. As the border is the first opportunity for the enforcement of Canadian product regulation on imported goods, the CBSA has the jurisdiction to enforce a broad range of product regulation. Failure to comply with applicable rules may result in delayed entry or seizure of non-compliant goods. Compliance with product regulation has become even more important with the adoption in 2011 of the new Canada Consumer Product Safety Act. The Act has introduced a stricter consumer protection regime with enhanced procedures for recalls, seizures and penalties. Companies that source product from outside of Canada should consult experienced counsel early in the procurement process to ensure that their supply chain is familiar with Canadian standards and to mitigate the risk of non-compliance and potential issues at the border or in the ultimate disposition of their products.
Canada employs a wide range of international trade and investment laws to regulate trade in goods, services and intellectual property as well as to safeguard Canadian investments abroad. Companies considering doing business in Canada need to be aware of several aspects of international trade law, including Canadian customs laws, export controls, foreign corrupt practices laws, trade remedies, foreign investment protection agreements, international trade negotiations and product regulations,
Bennett Jones’ International Trade & Investment Law Group
Our depth of experience and integrated approach to international trade advice makes Bennett Jones uniquely well-suited to serve our clients’ needs across the full span of international trade matters, from technical nuts-and-bolts regulation to high-level trade policy and international negotiations. Our international trade lawyers are intimately familiar with all of the government agencies and departments that administer Canada’s trade laws. We have represented leading international and Canadian firms, including Fortune 500 companies and corporations listed on leading Canadian and international exchanges, in trade investigations and proceedings. We safeguard our clients’ interests by developing creative and resourceful solutions to international trade and investment issues in a competitive commercial environment.