Major Trade Regulations To Look Out For In 2014

North American businesses involved in international trade must be aware of the ever-increasing regulations put forth by customs agencies of the countries they are dealing with, as well as other government agencies, whose regulations may affect the import and export of their goods. Compliance with these regulations remains the key to the success of your business. Despite the general notion of compliance being burdensome, if done right, trade com­pliance can add great value to your business processes. From influencing your decisions on sourcing and commodities to support­ing growth in new markets, businesses should examine how effective global customs planning can help improve their bottom line.

With the many trade regulations at different stages of development set to be implemented this year, our trade compliance experts shed light on what is in store for international trade and customs regulations in 2014.

Note: In order to help our readers easily scan and read this article, we have listed the various trade regulations below.

Canadian Regulations:

• Comprehensive Economic And Trade Agreement
• Trans-Pacific Partnership (TPP)
• ACI eManifest For Highway Carriers
• eManifest - Importer Advance Trade Data
• CBSA’s Assessment And Revenue Management (CARM)
• CARM Component One - Accounts Receivable Ledger (ARL) Project
• OGD Single Window Initiative
• General Preferential Tariff

U.S. Trade Regulations:

• US - EU Free Trade Agreement
• Food Safety Modernization Act Proposed Rules
• U.S. Generalized System Of Preferences (GSP) Program
• Manifesting And Entry Of Residue Found In Instruments Of International Traffic Into the USA
• CBP Priority Trade Issues - Verification Audits For Trade Agreements

Global Trade Regulations:

• Chinese VAT Tax
• Trans-Pacific Partnership (TPP)
  

Canadian Regulations:

1. Comprehensive Economic And Trade Agreement

On October 18, 2013, Canada and the European Union (EU) reached an agreement in principle on a Comprehensive Economic and Trade Agreement (CETA) that will significantly boost trade and investment ties between the two partners. CETA covers issues relevant to a modern trade and investment environment, from new market access opportunities to clear rules for European and Canadian traders and investors. It addresses the full range of conditions that shape international trade in goods and services in order to eliminate or reduce barriers.

Status Of The Agreement:

Now that an agreement in principle has been reached, both parties will seek to conclude the formal agreement and undertake a legal review of the document. Once the final agreement is signed, it will then need to be ratified by respective parliaments.

Impact Of CETA On Canadian Businesses:

This agreement is by far Canada’s most ambitious trade initiative. It covers most aspects of the Canada - EU bilateral economic relationship, including trade in goods and services, investment, and government procurement. It also grants the flexibility to include areas of mutual interest beyond those that have traditionally been included in Canada’s trade agreements, such as regulatory cooperation. CETA will open new markets to Canadian exporters throughout the EU. It will also make Canada a more attractive destination for investors and manufacturers.

Timeline:

The deal once ratified and implemented, likely by 2015 is expected to have huge economic benefits for decades to come.

What Is CETA?

2. Trans-Pacific Partnership (TPP)

The Trans-Pacific Partnership (TPP) is a trade agreement, under negotiation by 11 countries, which now includes Canada and Mexico. The other members are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. Canada’s formal entry into the negotiations follows the completion of domestic consultations, which all TPP members are required to undertake before approving new members.

The TPP addresses new trade issues and 21st century challenges, exploring both tariff and non-tariff barriers to trade and investment, with the goal of facilitating the movement of people, goods, services, capital, and data across borders. The TPP also addresses the unique challenges of small and medium-sized enterprises and seeks to maximize supply chain efficiencies in Asia and the Americas.

Status Of The Agreement:

TPP negotiators continue to advance technical work in preparation for the next TPP Ministers’ meeting, to be held this year. Learn more: Trans-Pacific Partnership Free Trade Agreement Negotiations.

Impact On Businesses:

Being part of the TPP enables Canada to not only strengthen partnerships in Asia-Pacific but also to help develop an initiative that is driving regional economic integration and setting new rules for how trade is negotiated on a broader scale.

Canada And Mexico Accept Invitations For The Trans-Pacific Partnership

3. ACI eManifest For Highway Carriers

eManifest is a major transformational initiative that impacts all areas of commercial cross-border processes. When fully implemented, eManifest will require carriers, freight forwarders and importers in all modes of transportation (air, marine, highway and rail) to electronically transmit advance commercial information to the Canada Border Services Agency  (CBSA) within prescribed mode-specific time frames.

On October 21, 2013, the Canada Border Services Agency (CBSA) released a statement on the ACI eManifest implementation that signaled yet another delay in the mandatory compliance date of its implementation of fall 2013. Updates regarding the status of the regulatory process will be made public when available.

Timeline:

Although CBSA has not yet set an official deadline for mandatory compliance to the ACI eManifest program, it is expected that this will be sometime in 2014.

How Importers Can Prepare For ACI eManifest:

It is important for all highway carriers to be fully aware that this program will be implemented. Additionally, though the CBSA remains committed to providing clients at least 45 days advance notice of the eManifest mandatory compliance, it is in their best interest to get registered and fully compliant as soon as possible. Carriers that wait until the 45 day notice period to sign up, may get caught up in the rush of last minute registrants and may find it difficult to be fully set up by the deadline. Further, early adoption allows participants to fine tune their processes and work out any bugs without fear of Administrative Monetary Penalty System (AMPS) penalties.

ACI eManifest Informed Compliance Period Extended

4. eManifest – Importer Advance Trade Data

When eManifest is fully implemented, carriers will be required to provide the Canada Border Services Agency (CBSA) with advance cargo and conveyance data, freight forwarders will be required to provide advance house bill / supplementary cargo data, and importers will be required to provide importer Advance Trade Data (ATD).

The Advance Trade Data elements (ATD) that are to be submitted include:

• Importer of Record (IOR) number, name and address
• Country/State of Origin
• Country/State of Export
• Commodity HS number to the 6th digit
• Name and address of Manufacturer/Supplier, Seller (Vendor), Exporter (if different than the seller), Buyer (Purchaser), and Consignee

The CBSA Portal will be available for transmission of ATD starting July 2014. Importers will have to register for CBSA Portal and authorize transmitters who may send on their behalf.

ATD will be required on highway freight, however, a PARS transmitted before ATD will be accepted as, and take precedence over an ATD filed after the PARS. Although importers may use the service of a customs broker to transact business with the CBSA, they are advised to clearly communicate this to their customs broker as it would be an additional responsibility that might warrant a charge. PARS electronic commerce requirements will be changed by July 2014 to allow for manufacturer name to be transmitted. Manufacturers’ names will be required on offshore origin goods, including anything shipping from the USA which is offshore origin.

Timeline:

The CBSA will deploy electronic systems enabling importers to transmit eManifest and Advance Trade Data (ATD)  in July 2014. The roll out for ATD will be 12 months of optional or practice time, 6 months of informed compliance which is intended to mean no AMPS issued but cargo cannot cross until ATD is filed.

Advice For Importers:

We recommend having a discussion with your customs broker and clearly determine whether you or your customs broker will be responsible for transmitting the Advance Trade Data to Customs. Note that importers may be charged a fee by their customs broker to transmit this information on their behalf.

5. CBSA’s Assessment And Revenue Management (CARM)

CARM is a major government initiative that will modernize the Agency’s revenue management programs and systems, as well as automate the many current manual and labour-intensive processes required to collect, assess, manage and report on these revenues. The project consists of four components:

• The Accounts Receivable Ledger (ARL) (reported on separately);
• Client Identification;
• Assessment, Reassessment and Client Registration; and
• Trade Modernization.

Advantage For Importers:

CARM will create a revenue management system that, in addition to efficiently processing payments and reporting on revenues, will keep pace with technology and current business practices.

CARM Component One – Accounts Receivable Ledger (ARL) Project

This client-based accounting and revenue management system will eliminate inefficient manual processes. Business costs will be lowered for commercial clients through the use of electronic payment options and retrieval of your statements through a secure Web site.

Timeline:

CARM is currently in the design phase and its implementation is planned for April 1, 2014.

How CARM Will Benefit An Importer:

• An electronic option for the payment of duties and taxes;
• Ability to register, conduct assessment activities, obtain information and view financial transactions online through a Web portal;
• Retrieval of statements of account via a secure Web portal; and
• Client-based accounting that will improve the financial information flow.

Need Help Understanding CBSA's New CARM Client Portal?

6. OGD Single Window Initiative

The OGD Single Window Initiative is a joint initiative between the Canada Border Services Agency (CBSA) and other government departments (OGDs) and agencies wishing to receive release information electronically on commercial import data.

The trade community is required to provide paper documentation for the importation of commercial shipments that contain goods regulated by other government departments. Single Window Initiative (SWI) will help increase the efficiency of the border process by providing importers and brokers with a “single window” through which all required information can be electronically submitted to comply with customs and participating government departments and agency regulations, thus eliminating the need for paper. 

As a result, Canada’s SWI – similar to its U.S. equivalent, the International Trade Data System – will help maintain the balance between facilitation and security of trade.

It is CBSA’s intention to offer a lengthy testing window to trade so that trade can test the new Integrated Import Declaration (IID) with CBSA to ensure the coding of their business systems to:

• the proper EDI messages structure and standard, and
• the right data based on the various program requirements.

A test package will be created for trade to, in effect, certify that they are ready to submit the IID prior to the “go live” date.

Participating OGDs:

• Canadian Food Inspection Agency (CFIA)
• Natural Resources Canada (NRCan)
• Department of Foreign Affairs, Trade and Development Canada

OGDs In Test Environment:

• Transport Canada
• Health Canada / Product Safety

Timeline:

CBSA has advised that at this time there is no published date for SWI implementation. However, current planning is that the Integrated Import Declaration (IID) will be available for submission in a test environment in December 2013. Future implementation dates for SWI are being discussed and we will be informed as they are confirmed.

In the coming year, Canada is aiming to make electronic data submission possible for the SWI. Over the next three to six months, the CBSA will:

• collaborate with the US to align data requirements and programs, where possible;
• consult with Government departments and the trade community to develop strategies for improved information and integration at the border; and
• align SWI with existing developments at the border (e.g. eManifest).
• All Participating Government Departments and Agencies will be implemented by 2016.

Impact On Importers:

• Eliminate unnecessary paper and redundant processes at the border.
• Ensure consistent application of Government of Canada import regulations and reporting requirements.
• Align with international standards for goods identification and processing.
• Reduce border compliance costs and improving border efficiency, while enhancing risk assessment efforts to contribute to the overall health, safety and security of the people of Canada.

What Is The Single Window Initiative?

7. General Preferential Tariff

The Government is undertaking a comprehensive review of Canada’s General Preferential Tariff (GPT) regime to respond to these developments in the global economic landscape, and ensure that this form of development assistance is appropriately aligned with Canada’s development policy objectives.

Canada’s General Preferential Tariff Withdrawal Order (2013 GPT Review) withdraws entitlement to GPT benefits from 72 higher-income and trade competitive countries (out of current 175 beneficiaries). With this change, these countries will instead fall under the “Most-Favoured-Nation” (MFN) status, and will be subject to a higher duty rate.

To access the full Canada Gazette notice including a list of the countries affected visit the General Preferential Tariff Withdrawal Order (2013 GPT Review).

Timeline:

The changes will be made in respect to goods imported into Canada on or after January 1, 2015 and will remain in effect until December 31, 2024.

Impact On Importers:

If you import from any of the countries losing GPT benefits beginning January 2015, you will have to pay higher duty. China will likely be the most significant to note as they are a big player in trade with Canada. Some tariff increases will range from 3% to 6%, while on the higher end tariff increases for certain textile products will range from 16% to 18%. For example:

• Plastic and steel articles have a current GPT rate of 3% which will increase to 6.5%
• Laundry soap is currently free but will increase to 2.5%
• Carpets are currently at 8% GPT and will increase to 12.5%

Advice For Importers:

• Check the Country of Origin of your goods and which tariff treatment is being applied.
• If you import from any of the countries losing GPT, check to see they are covered by any other trade agreements. For example Mexico, Chile and Peru are losing GPT status but still have free trade agreements in place.
• Review your supply chain and consider suppliers from another country.

U.S. Trade Regulations:

1. U.S. – EU Free Trade Agreement

The United States and European officials have been meeting again to discuss further details of the proposed Transatlantic Free Trade Agreement.

Impact On Importers:

Should such a proposal come to pass, experts project that this agreement would create the world’s largest free trade area, and have a tremendous impact on job creation.

Timeline:

While there does not appear to be a general consensus on the advisability or likelihood of such a pact, discussions are slated to continue in 2014. We will keep you posted as more information becomes available.

2. Food Safety Modernization Act (FSMA) Proposed Rules

The U.S. Food and Drug Administration (FDA) proposed a number of new rules during 2013.  Some of these are in the “public comment” period at this time, with conclusions happening during the first and second quarters of 2014. From there, the FDA will submit final language to the Office of Management and Budget (OMB ) for review and publication in the Federal Register, and the regulations are expected to become final within 90 days of issuance.

Timeline:

The proposed rules are expected to be in place or in play during 2014. While there are many proposed rules, guidance documents and reports that are part of the Food Safety Modernization Act, we list here a few of the primary issues that we believe importers and exporters need to ensure all parties within your supply chain are complying with, rules expected to be in place or in play during 2014.

• Written food safety plan, which incorporates proof that you are following the plan, to include hazards analysis, preventive controls, monitoring, corrective actions, verifications and record-keeping. Learn more: FSMA Proposed Rule for Preventive Controls for Human Food
• Sanitary transportation rule for both human and animal food – This will affect shippers, carriers, receivers and other parties involved in food transportation. Learn more: Sanitation and Transportation Guidance Documents and Regulatory Information
• Foreign supplier verification program – Importers will be required to have a program to verify that the food products they are importing are safe, which includes verifying that their suppliers are in compliance with reasonably appropriate risk-based preventive controls. Learn more: FDA Food Safety Modernization Act – General Information on Imports

3. U.S. Generalized System Of Preferences (GSP) Program

The U.S. Generalized System of Preferences (GSP) is a program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products when imported from one of 127 designated beneficiary countries and territories.

The GSP has been an active part of the Trade Act since 1976. This is a program that must be re-designated on a regular basis by the U.S. Congress. On occasion, Congress neglects to extend the program, and it has been inactive since August 2013.

Status Of GSP:

As of January 2014, the U. S. Congress is working toward the goal of voting on an extension of the GSP program. There is continued strong support for the program, and the Obama administration is working closely with Congress to extend the program. If the program is extended retroactively, Customs will likely handle refunds in the same manner that they have handled it during past expiration.

Timeline:

While Congress has set no established time frame for the renewal of the GSP program, Pacific Customs Brokers will monitor this situation for updates and keep you informed.

Impact On Importers Of Goods Into The United States Under The GSP:

During the past few times when the program has lapsed, importers have been required to pay the “general”, or Normal Trade Relations (NTR) duty rates for the shipments imported during the lapse. Once the program has been reauthorized and been made retroactive, Customs has refunded the duties paid on those entries that were entered under the appropriate special programs indicator. Each renewal in the past has been made retroactive, however, this is not automatic.

Generalized System Of Preferences Set To Expire July 31, 2013

4. Manifesting And Entry Of Residue Found In Instruments Of International Traffic Into The USA

In July of 2009, U.S. Customs and Border Protection (CBP) issued a ruling requiring all containers (all modes of transportation) to have entry filed for any residue remaining at the time of entry into the United States. This was quite a reversal of previous rulings, which had allowed for instruments of international traffic containing residue to be entered as empty.

At the time of the ruling, CBP determined that the trade community needed additional time to fully understand and comply with the ruling’s requirements, and thus the ruling has been in an “informed compliance” stage since that time.

Timeline:

The pilot test had been slated to begin Nov. 25, 2013 but shortly before that date, CBP stated that more time is needed to address remaining concerns and has postponed it indefinitely.

Impact On Importers:

This test will allow for an entry designed to capture the details of residue in containers that will be cleaned or re-filled that can be transmitted from the information on the manifest through an indicator that identifies it as a Residue Entry.

Parties not wishing to participate in the test, however, will be required to “classify, enter, and manifest” (formal or informal entry) the residual cargo in accordance with the underlying statutes and their implementing regulations when the test begins.

If the Residue Test is successful (once implemented), further amendments to the CBP regulations will be proposed.

Manifesting And Entry Of Residue Found In Instruments Of International Traffic Into The USA

5. CBP Priority Trade Issues – Verification Audits For Trade Agreements

CBP prioritizes which trade issues to look at most carefully by using a strategically layered risk management approach based on the potential impact of noncompliance. The Office of International Trade (OT) in CBP focuses resources on five designated Priority Trade Issues (PTIs)—high-risk areas that can cause significant revenue loss, hurt the U.S. economy, or threaten the health and safety of the American people. These PTIs are reviewed periodically as OT constantly assesses new risks and how it can best enforce the trade laws of the U.S.

Timeline:

Priority Trade Issues are an ongoing initiative without a pre-defined timeline.

Impact On Importers:

Priority Trade Issues highlight the areas of focus by CBP. Importers are likely to see an increase in reviews of their Special Program Indicators (SPI) claim documents such as NAFTA certificates.

It is important to continually review and self-audit your NAFTA or other free trade agreement documentation on a frequent basis. Customs regulations require that you be able to provide all requested supporting documentation for any claim that you make regarding a free trade agreement promptly upon request. If you are unable to produce those documents, Customs may deny your claim and require you to pay duties on both past and future transactions, in addition to initiating penalty proceedings for false claims.

Global Trade Regulations:

1. Chinese VAT Tax

In August of 2013, the Chinese government introduced a new VAT tax for all logistic activities inside China. Shippers and forwarders on the Asia-Europe trade route were faced with new charges after carriers confirmed that they would be adding a further 6% to freight rates in response to the Chinese government’s decision to introduce VAT on ocean shipments.

In December 2013, the Chinese Ministry of Finance (MOF) and the State Administration of Taxation (SAT)  issued Circular No.106 withdrawing the requirement to pay VAT on international shipping income, effective retroactively to August 1, 2013.

Impact on Importers:

The elimination of the Chinese VAT tax for foreign shippers is good news for Canadian and U.S. importers who had a 6% surcharge tacked onto the cost of their imports if their Incoterms® or Terms of Sale were Cost, Insurance and Freight (CIF), Delivery Duty Unpaid (DDU) or Delivered Duty Paid (DDP).

Timeline:

It is understood beginning January 15, 2014 the exemption will be retroactive to August 1, 2013 when the current arrangements first came into effect.

2. Trans-Pacific Partnership (TPP)

The Trans-Pacific Partnership (TPP) is a trade agreement, under negotiation by 11 countries, which now includes Canada and Mexico. The other members are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. The TPP addresses new trade issues and 21st-century challenges, exploring both tariff and non-tariff barriers to trade and investment, with the goal of facilitating the movement of people, goods, services, capital, and data across borders. The TPP also addresses the unique challenges of small and medium-sized enterprises and seeks to maximize supply chain efficiencies in Asia and the Americas.

Status Of The Agreement:

TPP negotiators continue to advance technical work in preparation for the next TPP Ministers’ meeting, to be held early this year. Learn more: Trans-Pacific Partnership Free Trade Agreement Negotiations.

Impact On Businesses:

This multilateral free trade agreement is intended to open up trade with smaller countries located in Asia-Pacific and create the world’s largest free trade zone by lowering tariffs on industrial, agricultural, and textile goods.

Staying current on the latest developments in trade community can give your business a competitive edge. We understand your business decisions need to be based on the most current information available and offer a range of resources for the trade community. As part of our ongoing effort to assist you, we have a number of trade compliance seminars and webinars throughout the year. You can find a current listing of upcoming seminars and webinars from our website.

In addition, our weekly trade newsletter, “Trade Regulation Updates” section of our website and the ”Your Broker Knows” blog aim to keep you informed on the latest in customs regulations, international trade, shipping and logistics issues. We also encourage you to connect with us on various social media platforms like LinkedIn, Twitter, Facebook and YouTube as a convenient way to get these latest updates.