Category Archives: Featured

Cost and Capacity: import and export challenges for traders under COVID-19

By Ken Mark

The European Union Chamber of Commerce in Canada (EUCCAN) recently presented an update by Montreal-based logistics consultant Christian Sivière on the challenges Canada’s international trade community now face on importing  and exporting goods with their European partners.

The main challenges include rising carrier costs and decreased capacity. Air cargo carriers top the list since they face stiffer regulations than ocean-going freighters. Civière cited force majeure pandemic-related concerns that may lead to legal issues resulting in financial and other penalties arising from transit damage and delays.

Air cargo faces severe challenges in the wake of the global Covid-19 pandemic. Losing cargo space from cancelled passenger flights has really hurt. Most of us do not realize how much air cargo is carried below decks along with their luggage. Sivière estimates that almost 50 percent of conventional air cargo was stowed in the belly of of such planes.

To fill that gap, shippers and forwarders others are pinning their hopes on placing cargo above decks in passenger aircraft. To do so, they are bundling cargo in strong bags and netting, placing them on existing seats or in spaces under them, in aisles as well as overhead compartments. Some carriers have started removing all seats following new related government regulations. But Sivière points out that smaller doors on passenger aircraft limit the size of cartons that can be carried above deck.

He also warns shippers that the cost of such air shipments have jumped.  “If they were used to paying one € per kilo before, it’s now up to 3.5€ to 4€ now. The major challenge carriers now face is to attract enough traffic to keep earning revenue and even more important to keep their pilots active. They are the carriers’ most valuable assets, not the the aircraft.”

Rumours have now started to swirl about converting the Airbus A380, the world’s largest passenger plane, most of which have been taken out of service, to be refitted to carry cargo.

Since Canada is a small market, planes servicing Europe typically land only in our largest cities i.e., Montreal, Toronto, Calgary and Vancouver. Most other large American and European airlines offer more service to major US markets such as New York, Chicago and Los Angeles. From there they can be trucked up to Canada. That also include courier parcel carried such as FedEx and UPS that arrive at their terminals in Middle America.

In the other direction, several smaller carriers are landing in Leipzig, Gatwick and other smaller airports. One Canadian carrier, Cargojet Inc. offers a fleet of 26 all-cargo aircraft that serves 15 major cities across North America each business night and other selected international destinations.

Air Canada continues to offers a limited number of regular flights such as Montreal-Paris and Toronto-London and possibly soon Brussels and Amsterdam.

But since passenger air traffic has been drastically reduced to limit the spread of covid-19 virus on planes and in crowded airports, all shippers must must now adapt to the “new normal”- closer inspections, fewer flights and higher rates and the complexities of dealing with new and different supply chain partners.


Sylvie Vachon Recipient of CIFFA’s 2020 Donna Letterio Leadership Award

TORONTO, May 7, 2020.—CIFFA, the Canadian International Freight Forwarders Association, is pleased to announce the winner of the 2020 Donna Letterio Leadership Award, Sylvie Vachon, President and CEO of the Montreal Port Authority.    

CIFFA introduced the annual Donna Letterio Leadership Award in December 2015. The award is granted annually in memory of former CIFFA President Donna Letterio, who passed away in August 2013. The award recognizes a woman in the global freight logistics sector who has demonstrated, as Donna did, professionalism, commitment, leadership and a passion for excellence in her career and in her life.  

In addition to the award, CIFFA will prepare a cheque in Sylvie’s name for $1,000 which will be presented to Bladder Cancer Canada.   

Ms. Vachon joined the Montreal Port Authority in 1990, starting in the Human Resources department. Through her escalating roles in this department, Sylvie was a member of the Management Committee and managed the activities of the Real Estate, Finance, Human Resources, Procurement, Information Technologies and Continuous Improvement departments. 

In 2009, Sylvie was promoted to the position of President and Chief Executive Officer, a role she currently holds to this day. In this capacity, she is responsible for the direction and management of all sectors of activity, including: Strategy, Operations, Infrastructure, Growth and Development, Corporate Affairs, Finance, Administration, Human Resources and Public Affairs.    

Ms. Vachon strongly believes in aligning business objectives with social concerns. She is committed to promoting and reaffirming the port’s economic and international importance and at the same time extremely sensitive to its social responsibility. She is current Chair of Cargo M, a Logistics and Transportation Cluster of Metropolitan Montreal, is on the Board of Directors of numerous trade associations and also is a governing member of the Quebec Business Council and the Quebec Business Council on the Environment.  

On a personal level, she is also involved in championing numerous causes and fundraising activities.   


CUSMA implementation slated for July 1

By Kim Biggar 

Canada, Mexico and the United States have each ratified the Canada-U.S.-Mexico Agreement (CUSMA)—as it’s known in Canada (USMCA in the U.S.)—and the deadline for implementation is looming. The agreement is scheduled to take effect on July 1, replacing the 26-year-old NAFTA. However, with the coronavirus pandemic having shut down businesses in all three countries and refocused governments on containing the virus and mitigating its economic impacts, there have been many calls, from both politicians and business executives, to delay the agreement’s entry into force.  

Despite the uncertainty about timing, governments in the three countries are preparing for implementation, developing regulations to lay out how they will apply the new rules of the agreement. Until those regulations are in place, businesses cannot fully prepare for the changes they will face. However, they can certainly begin the process based on information in the agreement itself and tweak their preparations when the regulations are announced. 

A consultant on free trade agreements, import/export, supply chain optimization and related topics, Christian Sivière, President at Solimpex in Montreal, says the groups calling for the delay in implementation are largely involved in the auto and auto-parts industry.  

Companies in that sector face the most changes with the new agreement, in particular around the new, more-stringent rules of origin that will require more North American content in vehicles made on the continent. This is not surprising, says Sivière, since the move under NAFTA of much auto production to Mexico was President Trump’s “main motivation” for renegotiating the agreement. 

“In order to qualify for duty-free entry, regional value content (that is the amount of production that happens in North America) was increased from 62.5% to 75% (starting at 66%, to be increased over three years) for passenger vehicles,” say Inu Manak and Simon Lester, in their December 2019 article, “Evaluating the New USMCA.” Further, “there is an additional Buy America provision that requires producers to source 70% of the steel and aluminum used in their production to originate in North America.” 

In an April 1 article, “USMCA Implementation, What’s Next?” Adrienne Braumiller of Braumiller Law Group says, “One positive note is that in many cases, the rules of origin are more simplistic and originating status can be more easily met. Thus, many companies may determine that a higher number of goods will qualify under USMCA than did under NAFTA.” She continues to say, however, that “in other cases, such as with the automotive sector, the rules are more complex with various overlapping thresholds,” confirming Sivière’s assessment. 

The agreement, despite the many months of negotiation and browbeating that were part of the process to create it, turned out to be “not fundamentally different” from its predecessor, says Sivière. Apart from the changes for the auto industry, there will be “small changes for the textiles and chemicals industries,” he notes; most of the rest of the changes are not industry specific. 

A process change will see the certificate of origin required under NAFTA discontinued. Instead, an origin certification statement can be included “on any document,” according to Sivière. This change is in line with changes in other recent agreements, including CETA and CPTPP.  

While the origin certification statement might be included, for example, on an invoice, it must absolutely be present; compliance remains essential. Sivière foresees fewer shipments being held at the border due to missing certificates of origin, but likely more auditing “after the fact” to ensure compliance. 

Another change affecting many sectors will be the increase in the de minimis exemptions, of which there are two. The first, and most familiar, refers to the “thresholds under which low-value parcels can be imported duty/tax free.”1 Under CUSMA, Canada’s de minimis shipment-value levels will rise to C$150 for duties and C$40 for taxes. 

The second de minimis exemption, relating to the amount of non-originating material in a good, will also increase, from 7% to 10%. The same change was made in CETA and CPTPP. 

Revisions related to intellectual property, the sunset clause, legal terminology and so on are unlikely to have an impact on the day-to-day work of freight forwarders and logisticians, says Sivière. 

Customs Notice 20-14 – Implementation of the Canada-United States-Mexico Agreement (CUSMA), published on April 3, 2020, provides information on the changes to the Customs Tariff that will occur as a result of the implementation of CUSMA and summarizes requirements to benefit from the agreement’s preferential rates of duty. The notice specifies that regulatory amendments and new regulations made under the Customs Act as a result of CUSMA’s implementation will be announced later, in another customs notice. 


COVID-19 Resources

CIFFA is featuring a list of tools and resources to assist you and inform you during the COVID-19 crisis. If you have relevant updates to this effect please send to juliak@ciffa.com

Our office remains available to our members and business community during the period of uncertainty. Please direct any issue or concern to admin@ciffa.com.


Advocacy Update

CBSA Border Commercial Consultative Committee meetings outline 21st Century Strategy

By Kim Biggar

The Border Commercial Consultative Committee met in Ottawa from November 6 to 8 to provide an update on CBSA strategy, policy and projects.

In a session called “CBSA Strategy for the 21st Century,” Fred Gaspar, Director General of CBSA, noted the following priorities for the agency:

  • Working better with industry;
  • Developing a business expertise strategy;
  • Reviewing current KPIs;
  • Modernizing the Customs Act and legislation; and
  • Strengthening risk-based compliance.

Operational pressures and challenges include:

  • Emerging threats to health and safety (e.g., African swine fever);
  • Implementation of bilateral and multilateral trade agreements;
  • Implementation of an increasing number of measures stemming from trade disputes and remedies;
  • Increasing threat sophistication;
  • Increasing trade volumes and complexity of trade networks;
  • Pressure to modernize processes and employ newer technologies; and
  • Limited human and financial resources.

A review of current projects and initiatives looked at the following.

Cargo Preclearance

Work is being done to identify hubs in the U.S. through which significant volumes flow to Canada to enable customs inspections by CBSA officers in the U.S. Replicating Canadian border operations within a foreign jurisdiction is unprecedented and presents a complex undertaking; in preparation, the CBSA is internally assessing legal, policy, and operational dependencies.

The CBSA remains very interested in how the cargo preclearance vision can be leveraged to support parallel work within stakeholder business models. Current legislation needs to expand to include cargo.

The CBSA is also seeking out industry interest on participating in cargo preclearance pilots in the U.S.

The aim is to employ a small footprint in key locations and/or along strategic trade corridors to incrementally test operating procedures, infrastructure and logistics, while also assessing the impacts and benefits to stakeholders and the CBSA in a real-world context.

The Agency will continue to progress preliminary work on multimodal and courier pilot concepts, develop new pilot proposals and requirements, determine key issues and develop mitigation strategies.

Canadian Export Reporting System (CERS)

The CBSA is finalizing the testing of CERS, a web-based self-service portal replacing the Canadian Automated Export Declaration (CAED) system. The system was expected to be in production early in December.

Letters have been sent to all exporters and customs service providers who report using CAED or the Summary Reporting Program providing information on what to expect during the CERS onboarding phase.

Schedule:

  • January: Selected industry stakeholders will participate in the CERS pilot phase.
  • February: On-boarding communication will be distributed.
  • February: First wave of CAED users and all Summary Reporting Program (SRP) clients can begin using CERS.
  • March: Paper B13A reporters can begin registering for CERS.
  • April: Remaining CAED users can begin using CERS.
  • June: Mandatory electronic reporting for exporters. CAED to be decommissioned.

Single Window Initiative

CBSA is finalizing system changes to optimize the use of SWI for all participating programs, continue stakeholder engagement and employ a phased decommissioning approach to minimize impact on operations and industry. The current system will be decommissioned on April 1, 2020.

Culpability Framework

The culpability framework is the policy cornerstone that will guide operational efforts to nudge, direct or enforce compliance based on the relative risk that importers and their transactions represent. The framework enables the CBSA to proactively target compliance outreach to support voluntary compliance.

Changes are being planned to strengthen compliance. Higher AMPs and other measures are expected to effectively incent voluntary compliance. Predictability and national consistency are goals.

Assessment and Revenue Management (CARM) Project

Phase 1 will be deployed in fall 2020.

Electronic House Bills

A date has been confirmed for R856 (House Bill R2): June 6, 2020.

Once the system is in place, a new date for the beginning of a six-month informed compliance period (there will be no AMPS penalties for non-compliance during this period) will be necessary before making e-house bills mandatory.

Information sessions have started and will continue over the coming months. Detailed walkthroughs will be scheduled for all client types.

Trusted Trader Program

The Trusted Trader Renewal Working Group is working to modernize the Trusted Trader program to continue to expedite trade for low-risk, trusted partners.

The next steps will be to develop mutual recognition arrangements and to review minimum security requirements.

Secure Corridor Concept Pilots

The CBSA is leveraging technology to automate the electronic capture of passage data to achieve low-touch, remote processing of participating trusted traders.

Enhanced Detection Technologies and Tools

CBSA is increasing its capacity to detect guns, opioids and unreported pork products to stem the flow of illegal firearms, drugs, and foods and animal products that could spread African swine fever.

Infrastructure Planning – Land Border Projects

The CBSA is planning 24 upgrades between now and 2025 in coordination with the U.S. More than 100 land clearance sites are in scope.

Working Group Updates

  • Maritime: Examinations have been increased based on risk assessment. Service standards for the movement of containers at ports are to be established.
  • Highway ACI / AMPS: CBSA is looking for opportunities to improve highway carrier compliance. The Interim Highway Turnaround Policy has been extended through June 30, 2020.
  • Air Cargo: CBSA is implementing national protocols for aircraft searches and reviewing processes for the handling of HV, LVS and CLVS.
  • Manual Operations: A pilot is underway in Montreal involving the use of email and an electronic CBSA stamp for the processing of deconsolidation requests from freight forwarders. It provides efficiencies for both the CBSA and clients compared with the legacy paper-in-person process, particularly for clients without a physical presence near the longroom. The turn-around time is 30 minutes compared with 24 hours for the legacy process.

Upcoming projects and initiatives include development of an e-commerce strategy, blockchain, postal modernization, and large-scale imaging (LSI).