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In mid-June, Canada’s Minister of Public Safety and Emergency Preparedness introduced Bill C-21 “an Act to amend the Customs Act.”

Although the bill is a short one — in legislative terms, it carries dramatic impact on provisions to the Customs Act.  Where it is customary in my practice to focus on the importation of goods under the Customs Act, these amendments have absolutely nothing to do with customs duty collections.  Rather, Bill C-21’s amendments potentially impacts any Canadian business operating in international commerce, notwithstanding whether or not it implicates importation of goods.

The Bill is so broad as to affect business people traveling outside Canada, as well as businesses exporting goods.

So, what are the highlights to take away from these amendments?  First, I should mention that this Note is not intended to discuss privacy law issues — issues that frequently arise in my role as incoming Chair of the Canadian Bar Association – NS’s Privacy & Access Law Committee.

This post sets out ten things that Canadian businesses should know about Bill C-21. We are not going to address the privacy law issues that will be covered extensively by other.  I will be reserving such a discussion to an upcoming CBA Seminar hosted by my Committee.  So, with that in mind, here is what you should otherwise take away from C-21:

1.   Consistent with the agreement between Canada and the United States, announced in March, it is intended “to fully implement a system to exchange basic biographic entry/exit information at the land border and build off the process already in place.”

2.   Bill C-21’s primary purpose is to introduce the legislative requirements to collect biometric data for all persons exiting Canada.  Yes, people, Canada will now be doing to everyone what the United States does to all of its non-citizens (and what Disney attempts to collect whenever you enter one of its theme parks).  This process is designed to permit for matching entry and exit information.  Of course, this will also carry implications for non-citizens/legal residents of Canada attempting to establish minimum residency periods.

The specific language of the subsection 92(1) to the Customs Act, as provided by the Bill, provides that

[i]n relation to any person who is leaving Canada or who has left Canada, the Canadian Border Services Agency [“CBSA”] may collect, from a prescribed source, in the prescribed circumstances, within the prescribed time and in the prescribed manner, the following information:

(a)  the surname, first name and middle names, the date of birth, the citizenship or                                       nationality and the sex of the person;

(b)  the type of travel document that identifies the person, the name of the country or                                    organization that issued the travel document and the travel document number; and

(c)  the date, time and place of the person’s departure from Canada and, if the person                                   arrives in the United States, the date, time and place of their arrival.

Further, the Canadian Government is permitted under subsection 92(2) to pass regulations that would

(a)  prescribe the sources from which the information may be collected;

(b)  respect the circumstances in which the information may be collected; and

(c)  respect the time within which and the manner in which the information may be                                     collected.

Expect these regulations to be pivotal, containing details left out of the brief text of C-21.

3.  Business people traveling regularly for business, and spending a reasonable period outside of Canada could potentially be snagged in various legal issues limiting benefits to them.  For example, access to the Canadian health care system and other benefits could negatively impacted.  The “number of days in Canada,” limitation — which is carried in a slew of laws/regulations at both the federal and provincial levels — could come into play, limiting a Canadian citizen/resident’s ability to continuous — without impairment — access such benefits.  Consequently, individuals and businesses will be required to act conscientiously to learn and understand such limitations brought on by the number of travel days.

4.  The same rules will exist for business people traveling to Canada, as it may ultimately implicate the payment by those individuals of Canadian income tax.  Simply, the tracking by CBSA of both entry and exit data will permit the Canadian Government to calculate number of days in Canada, and to send tax assessment notices if the annual number of days is exceeded.

5.  Impact on Conveyances.  New reporting obligations are being imposed if business activity involves conveyances.  Subsection 93(1) of the Customs Act imposes obligations on a “prescribed conveyance” that departs from a place in Canada and has a final destination outside Canada.  Such a conveyance must to provide information regarding both passengers and place of departure.   Moreover subsection 93(2) authorizes the Minister of Public Safety & Emergency Preparedness to issue notification to any person required to give information under subsection (1) to require the person to take any specified measure with respect to the information.  Subsection 93(1) will impose an obligation to comply with ministerial requests to give information.

6.  Section 94 of Customs Act creates an obligation on persons leaving Canada to answer questions of a CBSA officer, specifically providing that

Every person who is leaving Canada shall, if requested to do so by an officer, present                             themselves to an officer and answer truthfully any questions asked by an officer in the                         performance of their duties under this or any other Act of Parliament.

This new requirement can be fraught with legal peril, as it seemingly provides CBSA with the ability to make a determination as to whether or not an individual is tell the truth.  A determination of something other than the truth could ensnare the traveler with potential offences under the Customs Act.  FYI:  CBSA officers commonly assume that individuals have provided false answers, even when responses are the result of simple mistakes.

7.  Section 95 currently imposes obligations to report exporting of certain goods.  The new Section 95 clarifies this obligation, requiring all goods being exported to be reported — consistent with written export reporting obligations.  Also, under Section 159, there will be a newly-created export smuggling offense.

8.  Expanded Detention Powers for CBSA.    Subsection 97.25(1) is being amended to permit CBSA to detain any goods that are to be exported, and that have been reported under section 95.   This power permits  CBSA to stop goods that are being exported and keep the goods from being exported.  Fortunately, the law contains various legal mechanisms to provide evidence to CBSA, in order to challenge the potential, indefinite detention of such goods..

There is certainly a lot to digest with these changes.  As you can see, the changes could have — in many circumstances — significant consequences (tax, immigration, criminal, customs duty-related, etc.), to travelers coming and leaving Canada.

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Are the concerns legitimate, whether looking at the actual provisions (which the population is not afforded an access — no transparency), or with enforcement mechanisms, or with the reality of whether or not even enforcement that bears upon violations of labour or environmental or other provisions will be subject to any real enforcement?  According to U.S. Senator Elizabeth Warren, the answer is “yes.”  Just over the past several hours, Warren issued a detailed report reflecting twenty-years of failed promises on free trade agreements:  http://big.assets.huffingtonpost.com/WarrenReport.pdf.  It bears careful reading.

As someone practice cross-border work, I can comment upon some of these pitfalls.  For instance, with NAFTA, there is always the direct threat of an actual country being directly sued by a corporation or individual for treaty violations.  In Nova Scotia, we recently saw one such ruling addressing a quarry conflict:  http://www.theglobeandmail.com/report-on-business/nafta-ruling-against-canada-sparks-fears-over-future-dispute-settlements/article23603613/.  Further, Finance Minister Joe Oliver recently threatened action versus the U.S. under NAFTA based upon the U.S.’s efforts to reel in financial regulatory fraud via the “Volcker Rule.”  See http://www.huffingtonpost.com/2015/05/14/canada-volcker-rule_n_7285098.html.

So, should a multi-national economic treaty permit for the overriding of laws supported by the vast majority of a country’s population:  labour protections, environmental regulation, intellectual property safeguards, etc.?  Constitutionally, the answer may be “yes,” as treaties — both in Canada and the U.S. — normally hold status that thrusts it higher than simple laws — whether federal or state/provincial.  However, realistically, should corporations or individuals be provided with an opportunity to override fundamental health, safety, welfare protections in the name of “free trade?”  I saw this first-hand, as I once advised an industry that I represented that there were NAFTA-based remedies for U.S. violations of something that fell outside the core areas I mention, above.  At the very least, there should be exemptions written into such treaties to protect these national interests.

However, we cannot hope to fathom whether such safeguards exist.  We do not really know what is being negotiated, nor the identities of the negotiators, public or private.  A complete lack of transparency rationally raises fears that any signatory nation to the TPP will also be shelving the interests of the vast majority of its people.  After all, “free trade” is not necessarily “fair trade.”

The bottom line is that the assessment of the effects of a treaty needs to be careful and considerate.  The TPP is going through, regardless of the notable, honourable efforts being demonstrated by Senator Warren.  So, once we get to see ‘what we got,’ we will need to figure out the implications — tax, commercial, environmental, labour, intellectual property, etc.

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60 Minutes recently covered an interesting story.  The story represents yet another instance where consumers need to be extremely cautious over the product they are purchasing.

In this case, Lumber Liquidators — a prominent chain marketing flooring materials for residential and commercial use — outsourced to China production of most of its laminate flooring products.  The outsourcing of production is nothing new, and laws in both the United States and Canada permit its companies to engage in such conduct.  A longer debate of the propriety of such corporate policies, including the impact on home nation economies, will be left for another day.

Per the 60 Minutes report, Lumber Liquidators either failed to keep adequate oversight over the levels of formaldehyde in their flooring, or — as inferred by the report — perhaps opted to reduce its overhead by 10-15% by permitting for cheaper flooring with dangerous levels of formaldehyde to be sold to consumers in 46 U.S. states.

Beyond the liability likely assumed by Lumber Liquidators — whether via negligence, gross negligence or intentional acts — this stands as an example of why U.S. and Canadian consumers need to be extremely cautious in buying something that is ‘to cheap to be true,’ and to identify the production source of the product.  Sadly, in too many countries regulation is loose or non-existent. Notwithstanding, it has become very popular for Western corporations — in cost-saving moves — to outsource production to developing nations, thus arguably putting profits (multiple times over) over people.

Last, if Lumber Liquidators — whose CEO appeared on 60 Minutes and, with the exception of responses to a couple of the questions posed, seemed reasonably candid — did not assume strong oversight over the manufacturing of its Chinese-made flooring products (something that, based upon the report, seems quite likely), then it is looking at serious liability concerns.  Presumably, the corporation is represented by strong legal counsel.  If so, then also — presumably — such legal counsel would have or should have warned its client to put in place strong controls for both the testing of, and the labeling of, its flooring products.  These companies rely upon such commercial lawyers to not only educate them regarding the ‘ins and outs’ of cross-border law, but also to advise them on necessary precautions to minimize possible liability.  Here, Lumber Liquidators is likely facing a lawsuit with potential liability in the hundreds of millions of dollars.

So, this begs the eternal questions — “what the heck happened and why?”

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