The Push For A NAFTA Agreement | April 20 2018

NAFTA flags












The last formal round of NAFTA talks was scheduled to take place April 8, 2018, but instead was replaced by a series of “high-level” political meetings in Washington D.C. These meetings have been taking place since the last round of formal negotiations took place in March. It is rumored that these talks could lead to a “symbolic agreement-in-principle”. In fact, Canada’s foreign affairs minister Chrystia Freeland was in Washington D.C., April 18, 2018, for meetings, and is likely to attend more meetings next week.

Why The Push For A NAFTA Agreement?

It appears the U.S. wants to get NAFTA negotiations out of the way while a trade battle looms with China. China has already fired back at the U.S. with punitive measures for imports into China.

Another looming threat is the Mexican elections on July 1, 2018, which could elect a potential President who has already criticized the U.S. administration’s views on Mexico. Additionally, the U.S. would like to have an agreement in place prior to the November 2018 Congressional midterms. For the U.S. the optimal date to reach an agreement will be May 1, 2018, to meet all the necessary deadlines for the revised NAFTA agreement to be approved by the current Congress.

Automobiles Is Currently NAFTA’s Most Contentious Issue

At the moment, the most contentious issue in the NAFTA talks is the provision regarding automobiles. Initially the U.S. was demanding half the value of an automobile be made solely in the U.S. to qualify for NAFTA’s zero tariffs. Now the Americans are asking for an unspecified percentage of each vehicle to be made by workers earning at least an average wage rate for the North American auto industry. This wage is to be recalculated each year. According to today’s calculations the wage would be approximately $16 to $17 an hour. This would likely not be an issue for Canada but a big issue for Mexico.

The U.S. has not changed its original proposal in many respects and has added rules, which further complicates reaching an agreement. As an example; there is still the proposal for a tiered system for auto parts where 85% of engines and advanced batteries must be made in the U.S. and 70% of monitors, wiring sets and autonomous vehicle parts, and 50% of brake pads and spark plugs. In addition the U.S. is demanding that certain auto parts made of steel or aluminum be made in North America which lines up with the U.S. Administration’s protection of the steel and aluminum industry.

The U.S. is further demanding that the bulk of the new rules would have to be in place within 3 years of the new agreement. Canada and Mexico are not in agreement with a number of the content proposals and timelines.

Why The Auto Industry Is Unhappy With The Current NAFTA Proposal

The auto industry is not happy with some of the rules proposed by the U.S. side, stating the new proposals seem just as unworkable as the original rules. As well, the tiered system proposed by the U.S. is excessively complicated and could drive up administrative costs as companies try to comply with the rules.

As it stands today many car components, such as electronic systems, are made in Asia. Building a viable manufacturing base in North America in only three years places a lot of pressure on the North American auto industry.

In addition to this, the U.S. have only a 2.5% tariff on imported cars. Tougher NAFTA rules could push the auto industry to automate their production facilities, taking jobs away from North Americans, or making the cars overseas where they would have to import them back to North America.

Where The NAFTA Agreement Stands Today

While it appears there is a push to have an agreement in principle by May 1, this does not rule out the possibility of months and years to finalize an agreement.  So where are we today with the NAFTA negotiations? To quote the trade negotiators “Nothing is agreed until everything is agreed”.

How Can I Stay Informed On Everything Trade?

You can stay informed on everything NAFTA and the ongoing negotiations between Canada, the U.S. and Mexico by subscribing to Pacific Customs Brokers email publications. You also have access to experienced trade advisory experts who can allow you to stay agile and act fast when a final decision is made on NAFTA.

Jan Brock | Author







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Canada Customs Focus: Improve Tariff Rate Quota Enforcement

Grapes and Cheese

The Office of the Auditor General of Canada (OAG) reported on the mismanagement of tariff rate quotas. Both Canada Border Services Agency (CBSA) and Global Affairs Canada were provided feedback to improve. This was included in the Spring Report to Parliament – Report 2 – Customs Duties, in May of 2017.

Limits on Tariff Rate Quota Exceeded

The OAG reported that “the Canada Border Services Agency and Global Affairs Canada did not work together to adequately manage the limits on quota-controlled goods coming into Canada.” The OAG estimated in 2015 the government should have assessed approximately $168 million of customs duties on imports of quota-controlled goods. Simply, the quota limits were exceeded. The goods included in this loss of revenue were dairy, chicken, turkey, beef and eggs.

Tariff Rate Quotas Protect Canadian Industry

This is important since quotas and Customs duties protect Canadian markets. By limiting the import of certain products, the Canadian government can assist Canadian businesses which compete with products that face fierce competition from export markets.

Certain goods imported into Canada are quota-controlled. Canada applies tariff rate quotas on these goods, which is a two-tier level of Customs duty rates. This is done to control the volume of goods coming into Canada. Examples of quota-controlled goods are dairy products, chicken, turkey, beef and egg products. A tariff rate quota sets a volume of a good which can be imported into Canada at a lower rate of duty and once the quota has been reached duties on subsequent imports are applied a higher rate of duty.

What Goods are Subject to Tariff Rate Quotas?

Goods subject to tariff quotas are listed in the Import Control List of the Export and Import Permits Act. Importers must obtain a permit from Global Affairs Canada either directly or through a Customs broker to bring these goods into Canada. If the importer does not have a permit to import a quota-controlled good at the time of the import, the CBSA allows the importer five days to get a permit from Global Affairs Canada.

Failure to Enforce Tariff Rate Quotas

The OAG report found that CBSA was negligent by failing to enforce the permit for quota-controlled goods in 2015. CBSA recorded the permit information in one system and the duties and taxes paid and owed in another. This meant the permitted amount and the actual amount imported on quota-controlled goods were rarely compared.

Global Affairs Canada were responsible for issuing the authorizations, certificates and permits for items on the Import Control List. However, the volumes imported did not match the volumes authorized at a lower rate of duty. The OAG found importers likely imported a significant volume of controlled goods into Canada without a permit and without paying the appropriate amount of duty.

Focus to Improve Tariff Rate Quota Enforcement

Both Global Affairs Canada and CBSA agreed they need to work more closely together to better enforce tariff rate quotas. Both parties agreed tighter enforcement would commence by September 2017.

It is important to note that regardless of whether a permit, a certificate or other authorization is issued or granted under the Export and Import Permits Act (EIPA) by Global Affairs Canada, it is the Importers and Exporters responsibility to ensure ALL requirements are met with respect to their importation of tariff rate quota goods.  Ensure all of your imports have been properly declared and duty paid before an audit determines otherwise.

You can contact a Pacific Customs Brokers Trade Advisor to assist you with reviewing your processes and help you obtain a permit or authorization from Global Affairs Canada.

Jan Brock | Author







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Deadline of Single Window Initiative Extended by CBSA

Single Window Initiative Vector

What is Single Window Initiative?

Single Window Initiative (SWI) is a program implemented by Canada Border Services Agency (CBSA) to streamline the sharing of data between the import community and the Canadian government.

You learned in our previous post, What is the Single Window Initiative, the amount of data reported in the current declaration to CBSA will increase under SWI when the commodities being imported are subject to Participating Government Agency (PGA) review. Therefore, the amount of information you will provide at the time of the import will increase to include any additional details the PGAs require.

If you are unsure of what Participating Government Agencies regulate your goods, you can find out in our guide, What Does My Commodity Need.

CBSA Extends Single Window Initiative Deadline

CBSA is implementing the recommendations made by the Federal Auditor General’s (OAG) Report 1 – The Beyond the Border Action Plan. The OAG recommended CBSA consider the perspectives of their stakeholders and ensure SWI enhanced the benefits to the stakeholders needs. CBSA has continued to reach out to its trade chain partners and with this extension the trade community will be able to become more equipped to handle SWI and IID changes.

It was reported by CBSA in March only 125 customs brokers were on board with SWI and less than 5% of transmissions per month were using Integrated Import Declaration (IID).

CBSA announced it “recognizes the transformative change SWI adoption represents to the trade community” and as a result has extended the deadline to onboard SWI/IID to January 1, 2019 and to decommission service options OGD PARS and OGD RMD to April 1, 2019.

CBSA realizes system changes for importers and customs brokers are costly. Identifying and completing data elements is a big step with SWI in comparison to faxing a permit to a PGA. In addition, if an importer is entering into a service agreement with a third party service provider for SWI the process is lengthy and can be complicated. The trade community has clearly stated it needs more time.

Are You Prepared for Single Window Initiative?

Although the deadline has been pushed a year, some early adopters have already implemented SWI reporting at the time of importation. Therefore, your imports that have previously entered Canada without issue, may now experience delays with CBSA and PGAs if they require additional information and you are not SWI ready.

Being an early adopter of SWI has allowed us to work out the technological changes and data sharing, far in advance of the implementation date. The strides our team is taking to accomplish being SWI compliant will greatly benefit you.

Pacific Customs Broker is proud to have passed all 99 test cases provided by CBSA and received CBSA’s endorsement for SWI readiness.

If you are importing into Canada we highly recommend you speak to your customs broker to ensure you are prepared for SWI and the IID requirements. If you prepare now you can become SWI compliant before the implementation phase is complete, and you will be able to trade with confidence knowing you are ready once SWI is fully implemented.

Have concerns about SWI or the IID? Tell us about them in the comments section below. As national members of the Canadian Society of Customs Brokers, we advocate for you by sharing your concerns to policy makers.

Jan Brock | Author







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Expect CBSA to Increase Monetary Penalties in 2018

Canadian Cash

An audit of CBSA has uncovered they have been too kind to importers who are non-compliant. Starting in 2018 there will be an increase in monetary penalties. Why? To encourage importers to become compliant, as well as capitalize on the added revenue provided by importer’s who continue to stay non-compliant.

The Report

In March of 2017 the Office of the Auditor General of Canada (OAG) prepared an Independent Assurance Report on the management of customs duties. This Report was presented to the Parliament of Canada.

The Report covered a number of topics related to the collection of Customs Duties.

Specifically the OAG found that the “descriptions of goods on import forms were often incomplete or incorrect, making it more difficult for the Agency to know exactly what was imported.”  The CBSA through compliance verifications estimates that importers misclassified about 20% of goods coming into Canada and may have ended up paying a lesser amount of duty as was owed.

CBSA’s Lost Revenue

The OAG warns in this report that CBSA reported losses of $42 million or more in revenue in fiscal 2015-16 due to misclassification by importers.

Improve Importer Compliance

The OAG acknowledges in the report that CBSA can charge a penalty to non-compliant importers. They singled out the Administrative Monetary Penalty C005 for importers who do not provide true, accurate or complete information on permits, certificates, licenses, documents, or declarations of imported goods. The three levels are $150 for first offense; $225 for second offense; $450 for third and subsequent offenses. The OAG found the penalties were too low to improve importer compliance. The Report states that in Fiscal year 2014-15 the CBSA charged 16,000 penalties, which represented less than 0.1% percent of the transactions for that year. In fact for the 2015-16 fiscal year total revenue from penalties was $4.4 million for an average penalty of $151.00. This pales in comparison to the $42 million lost in revenue for misclassification by importers.

Review Penalty System

The OAG recommended CBSA review their penalty system so that it ensures compliance with trade programs.

The CBSA has agreed and is in the process of reviewing their Administrative Monetary Penalty System (AMPS). Their view is to make the system a “meaningful deterrent to importer non-compliance related to the evasion of import revenues and ensuring compliance with trade programs.” CBSA says they will complete the system by June 2018.

What You Can Expect

If you are not compliant with customs they will be more likely to assess you a monetary penalty. This is the time for you to review and assess your operational plans for classifying goods. If you need assistance with reviewing and assessing your customs compliance, the trusted experts at Pacific Customs Brokers can help ensure you are compliant with customs.

Jan Brock | Author







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St. Patrick’s Day and Irish Trade

Pot of Gold Leprichaun Hat

St. Patrick’s Day, the holiday that started from Saint Patrick, a 5th-century missionary. Today we know it as a celebration of Irish culture. St. Patrick’s Day is unique because, according to Time, it is globally the most celebrated national holiday. The Irish who have dispersed around the globe have brought their culture along with them; however, the Irish have more than just fun culture to offer. In this post we will take a look at how a beautiful country with wonderful people has positively contributed to the world of trade.

High-Tech Industry

If you were to visit Dublin, Ireland and walk along the Dublin Docks you would be doing a double take on where you are. The docks are lined with large, futuristic buildings that don’t make you think about the quaintness of Ireland, but rather the tech giants of Silicon Valley. This is because Ireland has attracted the biggest and brightest U.S. tech companies. How? With the most profitable tax rates. Ireland is the world’s most profitable country for U.S. corporations. With a corporate tax rate of only 12.5% companies like Apple, Facebook, Google and Twitter have large offices located on the Dublin Docks. U.S. corporations receive benefits from the lower corporate tax rates while being able to pull from an English-speaking pool of potential employees.

The Tara Mines

In the early 1970’s an exploring team discovered the Tara Mines. You might be thinking what is special about the Tara Mines, Ireland and trade? Well, the Tara Mines contain the largest amount of zinc found in Europe and is the 9th largest zinc mine in the world. Zinc is important because it is used to galvanize other metals. This helps prevent metals such as steel and iron from corroding or rusting.

The Tara Mines also contain a large amount of lead, specifically the 2nd largest amount in Europe. Lead is important because it is used in many items we use on a daily basis which includes car batteries, ammunition, weights, radiation protection and paints just to name a few.

Big Pharmaceutical

The beneficial tax rates not only helped attract the top U.S. tech companies, but also the pharmaceutical industry. Amazingly, Ireland has 9 of the top 10 largest pharmaceutical companies in the world. Even at the low corporate tax rates of 12.5% Ireland receives over €1 billion in corporate tax every year. Every time you take some medicine for an ailment or allergic reaction, there is a very good chance the best and brightest in Ireland lent a helping hand.

Counting Sheep

Ireland’s main economic resource is its large fertile pastures. Just under 10% of all Irish exports are agricultural foods and drinks. The beautiful natural scenery throughout Ireland lends itself to over 5 million sheep and just under a million cattle. Interesting fact, there are more sheep in Ireland than humans.

The Luck of the Irish

The Irish have a lot to be proud of. Not only do they have wonderful people with a fun-loving culture, but a strong export economy that helps many people in many countries. If you want to explore your options and import products from Ireland or Northern Ireland, contact us to see how a trade advisory expert can help you. The luck of the Irish may be on your side.

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