Canada: USMCA: Customs Administration In The 21st Century

​The USMCA text compels all parties to apply their customs procedures in transparent, predictable and consistent manners to facilitate trade. Key changes in the USMCA from the NAFTA include eliminating the prescribed format for certificates of origin, providing a potentially broader window for origin claims under the Customs Act and an increase in de minimis thresholds for the collection of duties and taxes at the time of import.

The USMCA text mirrors many provisions of the World Trade Organization's Trade Facilitation Agreement (TFA), which entered into force in February 2017. Currently, there are 113 WTO member signatories, including all 3 USMCA parties.  The TFA was negotiated by WTO members to reduce trade costs and increase efficiencies in customs procedures to expedite the release of goods. In the simplest terms, the USMCA customs procedures follow commitments made broadly under the TFA designed to reduce compliance costs and speed up trade in goods, and implemented territorially for the United States, Canada and Mexico.

Changes from NAFTA

Customs administration and origin procedures are divided between Chapters 5 and 7 of the USMCA.  Chapter 5, Origin Procedures, modernizes NAFTA's origin procedures, while Chapter 7, Customs Administration and Trade Facilitation, updates customs administration, and codifies a number of longstanding customs practices. These changes modernize the USMCA and bring it into line with 21st century procedures.

There are numerous important changes to customs procedures from the NAFTA for certifying origin, post importation adjustments to origin, and express shipments that will benefit large and smaller importers.

Certification of Origin

The USMCA streamlines the origin certification process employed under NAFTA, which will speed up the release of goods by reducing anachronistic and rigid requirements such as original signatures and prescribed formats for certificates, and will provide greater flexibility for importers and exporters. The changes made bring modern business practices into the fold of the USMCA and reflect the desire to reduce the administrative cost of complying with requirements that generally do not involve high rates of non-compliance.

There are three important changes to the filing process for certificates of origin: (1) no prescribed format is required, unlike the NAFTA which requires the use of definitive information and formatting in a required Certificate of Origin; (2) electronic signatures and electronic submissions are permitted; and (3) importers may certify origin, unlike the NAFTA where only producers and/or exporters can complete a certificate of origin.

Under the NAFTA, parties were required to use a prescribed Certificate of Origin form, which was to be completed by the exporter.  Under the USMCA, parties "need not follow a prescribed format".  A certificate may be provided on an invoice or "any other document", but must, amongst other requirements, specify that the goods are originating (meeting the prescribed requirements under Chapter 5) and describe the goods in sufficient enough detail to allow for identification. USMCA certification of origin may be signed by an exporter, producer or importer and may be completed and submitted electronically with a digital signature. This brings the USMCA certification of origin into line with other FTA's like the Comprehensive and Progressive Trans-Pacific Partnership. Mexico has up to three and a half years after the USMCA enters into force to allow importers to complete a certificate of origin.

Post Importation Adjustments to Origin

The USMCA may expand the claim period for Canadian importers making post importation origin claims from 1 year (under NAFTA) to 4 years. Article 502 (Obligations Regarding Importations) of Chapter 5 of the NAFTA, provides a short window to qualify originating goods. If a claim for preferential tariff treatment is not made on the date of importation, an importer only has one year to make the tariff preference claim for a refund of excess duties. This "one year rule" did not operate in tandem with other customs provisions relating to changes to origin value, or tariff classification, and often barred recovery of duties.

Under the USMCA, Article 5.12, Chapter 5 (Origin Procedures) provides that an importing party may require that the importer make a claim no later than one year after the date of importation or a longer period if specified in the importing party's law. Given the change from the mandatory to permissive language, Canadian importers may have up to four years to make or correct origin claims under the USMCA.  Currently section 32.2(4) of the Customs Act, allows an importer up to four years to make corrections to origin declarations, which are then eligible for refunds under section 74(1)(c.1). It is unclear if these provisions will remain the same, or tighten the window for filing origin claims.

De Minimis (Article 7.8)

Under the USMCA, the parties are obligated to implement or maintain expedited customs procedures for express shipments.  The parties have agreed to the following amounts for de minimis thresholds for the collection of duties and taxes at the time or point of importation by express shipment:

  • Canada: $150 CAD (duties) and $40 CAD (taxes);
  • United States: $800 USD; and
  • Mexico: $117 USD (duties) and $50 USD (taxes).

Canada already maintains expedited customs procedures for express shipments under the Canada Border Services Agency's ("CBSA") Courier Low Value Shipment Program. This program is designed to clear express shipments and streamlines the reporting, release and accounting procedures for having a value for duty not exceeding $2,500 CAD and goods that are not controlled, prohibited or regulated. 

Under the USMCA, no customs duties or taxes will be assessed on goods imported into Canada with a value for duty under $150 CAD. This provision does not apply to a series of shipments (in an attempt to evade duties or taxes). The thresholds do not restrict subsequent assessment and collection of duties or taxes, which may mitigate the effect on Canadian retailers. This reflects the growth of e-commerce and a practical need to align customs procedures to the growth of cross-border commerce and the shift to on-line purchasing from bricks and mortar stores.

Codification of Canada customs procedures

The USMCA provides informal guidance on a number of customs procedures that are currently in administrative practice, but are absent from the NAFTA text, including the following:

  • Communication with Traders (Article 7.3)
  • Enquiry Points (Article 7.4)
  • Advice Regarding Duty Drawback or Duty Deferral Programs (Article 7.6)
  • Release of Goods (Article 7.7)
  • Express Shipments (Article 7.8)
  • Use of Information Technology (Article 7.9)
  • Single Window (Article 7.10)
  • Post-Clearance Audits (Article 7.13)
  • Authorized Economic Operation (Article 7.14)
  • Review and Appeal of Customs Determinations (Article 7.15)
  • Transit (Article 7.17)  
  • Penalties (Article 7.18)
  • Customs Brokers (Article 7.21)

Although the CBSA has adopted or is in the process of updating many of these customs procedures, partly resulting from the WTO TFA commitments, the USMCA will ensure there is consistency among the parties. We have highlighted some of the parties' obligations under the USMCA and outlined recent initiatives by the CBSA to update Canadian customs procedure below. 

Use of Information Technology (Article 7.9)

All parties are obligated to adopt or maintain procedures allowing for the electronic payment of duties, taxes and fees charged by customs officials in connection with importation and exportation of goods. The CBSA is in the process of modernizing its payment processes through the CBSA Assessment and Revenue Management project. Importers and brokers now use the Accounts Receivable Ledger which reconciles transactions in a single account and facilitates online banking. 

Single Window (Article 7.10)

A "single window" allows a party to submit one copy of all customs and regulatory documentation related to an importation of goods into one interface. These documents are then distributed by the single window to various government agencies to obtain the required approvals to release the goods.   A single window facilitates the timely release of goods by increasing the speed of approvals for import permits and other regulatory approvals and reducing red tape for importers and exporters.       

Under the USMCA, all parties are obligated to establish and/or maintain a single window system by December 31, 2018 and to minimize the extent to which paper documents are required if electronic copies are provided. Mexico opened a single window, the Ventanilla Unica, in September 2011 when it began registering users and initiated is first customs clearances in 2012. In August 2017, the United States launched a single window on its Automated Commercial Environment (ACE) platform.

In March 2017, the CBSA launched a single window initiative (SWI), which allows importers to report information to the CBSA (via an Integrated Import Declaration) in advance of import and to obtain the necessary import approvals from various regulatory agencies, like the Canadian Food Inspection Agency.

At this point in time, the SWI is limited to imports, but Canada is obligated under the USMCA to review the SWI with a view to expanding its functionality to cover all export and transit transactions.

Authorized Economic Operator (Article 7.14)

Authorized Economic Operator (AEO) programs allow companies to enjoy more efficient and faster border crossings after an assessment of a company's security profile.  In Canada, the CBSA administers the Partners in Protection program, which allows program members noted as "low risk" to face less border delays. The United States and Mexico have comparative programs, respectively, the United States' Customs Trade Partnership Against Terrorism and Operadores Económicos Autorizados.

Under the USMCA, all parties are encouraged to cooperate and share information regarding their AEO programs, to establish best practices, exchange information regarding authorized operators and to implement benefits for operators authorized by other parties.

Review and Appeal (Article 7.15)

The NAFTA text was limited to providing rights of review and appeal for origin determinations and advance rulings, only. The USMCA confers broader rights and includes a commitment to providing "effective, impartial and easily accessible procedures for review and appeal of administrative determinations on customs matters". In Canada, the statutory appeal mechanism for customs matters is already quite broad. Customs appeals are heard by the President of the CBSA pursuant to section 59 of the Customs Act, which provides for appeals of origin, tariff classification, value for duty and marking determinations of any imported goods at any time within four years after a date of determination.

Penalties (Article 7.18)

Under the USMCA, all parties are required to administer penalties in a uniform manner across the country. Penalties must only be imposed on persons legally responsible for a breach, must be based on the facts and circumstances of the case and must be commensurate with the degree and severity of the breach (clerical errors are not subject to assessments of penalties). The CBSA currently maintains a Master Penalty Document that outlines its administrative monetary penalty system including the fees associated with offences and guidelines with examples of non-compliance that are applicable across Canada. The United States Customs and Border Protection Agency operates a Penalties Program and has full authority to assess penalties and seize merchandize for violations of customs laws, which are assessed by Fines, Penalties and Forfeiture Officers.

Working towards a cooperative future

The USMCA entrenches the WTO TFA customs commitments in a regional context. The TFA is a broad agreement that aims to expedite the movement, release and clearance of goods.  The customs provisions of the TFA are largely mirrored in the text of the USMCA, such as: requiring members to establish inquiry points; posting customs procedures on the internet; providing parties with an opportunity to comment on laws and regulations; issuing advance rulings in a timely manner; providing pre-arrival processing for goods to expedite their release upon arrival; maintaining a low rate of physical inspections and examinations and rapid release times for authorized operators; expedited shipping procedures; and border agency cooperation.

The USMCA text also contemplates the future administration of customs and trade facilitation by establishing a "Trade Facilitation Committee" (Article 7.22) and a commitment to regional and bilateral cooperation on enforcement (Article 7.26). The Trade Facilitation Committee will make parties accountable to improving their customs procedures, help to facilitate the exchange of information regarding important cases on tariff classification and valuation or emerging trends and issues, will provide a forum to discuss emerging trends and will allow parties to take joint action to reconcile inconsistencies in policy or procedure.

Cooperating on enforcement will ensure the efficacy of the USMCA, for example, ensuring that claims for preferential tariff treatment under the agreement are accurate and uniform among the territories. Parties are also obligated to provide advance notice of administrative changes, modifications of laws or regulations.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions