Includes import documentation and other requirements for both the U.S. exporter and foreign importer.
The Canada Border Services Agency website lists the required documents for import at www.cbsa-asfc.gc.ca/menu-eng.html. The most important document required from a U.S. exporter is a properly completed Canada Customs Invoice or its equivalent for all commercial shipments imported into Canada. The exporter can use its own form if the required information is provided. At the border, the importer or customs broker also submits Form B3, the customs coding form. Further information on Form B3 can be found in the brochure “Importing Commercial Goods into Canada – How to complete Form B3 when importing commercial goods” (www.cbsa-asfc.gc.ca/publications/pub/bsf5079-eng.html). Other documents that trucking companies provide for customs clearance may include a cargo control document and bill of lading. Some goods such as food or health-related products may be subject to the requirements of other federal government departments and may need permits, certificates, or examinations.
Customs brokers can assist U.S. exporters with details of the import documentation process, including Canada’s non-resident importer program, in which the United States exporter in the United States obtains a “business number” and can then be the “importer of record” for purposes of customs clearance. This arrangement offers many marketing advantages, in particular the opportunity to remove the burden of customs clearance of commercial shipments from the Canadian customer. Large retailers often demand that an exporter complete whatever paperwork is required so that all the retailer needs to do is unload the goods from the truck and pay the exporter for the goods. Many brokers advertise their non‑resident importer programs on their websites.
To claim dity-free status under the U.S.Mexico-Canada Agreement, goods need to meet certain eligibility. To learn more about qualifying goods and certifyign origin, visit trade.gov/usmca website.
For most mail-order shipments, the only paperwork needed is a standard business invoice. Companies should indicate the amount the customer paid for the goods, in either U.S. or Canadian dollars. If goods are shipped on a no-charge basis (samples or demos), the company must indicate the retail value of the shipment.
U.S. companies shipping commercial goods to Canada need to be aware that the Canada Border Services Agency (CBSA) eManifest program (https://www.cbsa-asfc.gc.ca/import/menu-eng.html). eManifest requires carriers, freight forwarders, and importers in all modes of transportation (air, marine, highway, and rail) to transmit cargo, conveyance, house bill/supplementary cargo, and importer data electronically to CBSA prior to loading in the marine mode and prior to arrival in the air, rail, and highway modes.
Agricultural Supply Management
Canada uses supply-management systems to regulate its dairy, chicken, turkey, and egg industries. Canada’s supply-management regime involves production quotas, producer-marketing boards to regulate price and supply, and tariff-rate quotas (TRQs) for imports. Canada’s supply-management regime severely limits the ability of U.S. producers to increase exports to Canada above TRQ levels and inflates the prices that Canadians pay for dairy and poultry products. Under the current system, U.S. imports above quota levels are subject to prohibitively high tariffs (e.g., 245% for cheese and 298% for butter).
The USMCA expands market access opportunities for dairy products through new TRQs exclusively for U.S. products. For example, by year six of the USMCA, quota volumes will reach 50,000 metric tons (MT) for fluid milk, 10,500 MT for cream, 4,500 MT for butter and cream powder, 12,500 MT for cheese, and 7,500 MT for skim milk powder. Under the USMCA, Canada will eliminate tariffs on whey in 10 years and margarine in 5 years. Canada will open new TRQs for U.S. chicken (quota volume will reach 57,000 MT by year six of the USMCA) and for U.S. eggs and egg products (quota volume will reach 10 million dozen eggs equivalent by year six of the USMCA). In addition, Canada will expand access for U.S. turkey. Canada and the United States also agreed to strong rules to ensure TRQs are administered fairly and transparently to help ensure exporters benefit from the full market access negotiated in the USMCA.
The United States remains concerned about potential Canadian actions that would further limit U.S. exports to the Canadian dairy market. The United States continues to monitor closely any tariff reclassifications of dairy products to ensure that U.S. market access is not negatively affected.
Canada establishes discounted prices for milk components for sales to domestic manufacturers of dairy products used in processed food products under the Special Milk Class Permit Program (SMCPP). These prices are “discounted,” being lower than regular Canadian milk class prices for manufacturers of dairy products and pegged to U.S. prices or world prices. The SMCPP is designed to help Canadian manufacturers of processed food products compete against processed food imports into Canada and in foreign markets.
An agreement reached between Canadian dairy farmers and processors in July 2016 introduced a new national milk class (Class 7), with discount pricing for a wide range of Canadian dairy ingredients used in dairy products, to decrease imports of U.S. milk protein substances into Canada and increase Canadian exports of skim milk powder into third country markets. Provincial milk marketing boards (agencies of Canada’s provincial governments) began implementing Class 7 in February 2017.
The United States has raised its serious concerns with Class 7 with Canada bilaterally and at the World Trade Organization (WTO) Committee on Agriculture. Under the USMCA, Canada eliminated Class 7 and must ensure that the price for non-fat solids used to manufacture skim milk powder, milk protein concentrates, and infant formula will be no lower than a level based on the USDA price for nonfat dry milk. Transparency provisions obligate Canada to provide information needed to monitor compliance with these commitments. Canada will apply charges to exports of skim milk powder, milk protein concentrates, and infant formula in excess of thresholds specified in the USMCA.
Restrictions on U.S. Grain Exports
Several grain sector requirements limit the ability of U.S. grain exporters to receive a premium grade (a grade that indicates use for milling purposes as opposed to grain for feed use) in Canada, including the provisions of the Canada Grain Act and Seeds Act.
Under the Canada Grain Act, only grain of varieties registered under Canada’s Seeds Act may receive a grade higher than the lowest grade allowable in each class. Currently, the majority of wheat varieties commonly grown in the United States are not registered in Canada. These unregistered varieties are unable to receive a grade in Canada and are considered “feed wheat” and the seller typically receives the lower feed wheat price. This is particularly frustrating for Montana, North Dakota, and Minnesota wheat producers who may be incentivized to sell higher quality wheat to Canada if they could receive a “fair price.” The process to register a variety in Canada involves extensive testing for desired characteristics and growing hardiness and it can take up to seven years.
U.S. grain can be sold without a grade directly to interested Canadian purchasers at prices based on contract specifications. However, most sales occur through the bulk handling system in grain elevators. Grain elevators offer economic efficiencies by collecting and storing grain from many small-volume growers, giving them the ability to fulfill larger contracts and to demand higher prices for that ability.
The USMCA requires Canada to treat U.S. wheat no less favorably than Canadian wheat with respect to assigning a quality grade, as long as the wheat is registered in Canada. Under the USMCA, Canada no longer requires a country-of-origin statement on a quality grade certificate for U.S. wheat.
Canada requires financial institutions in Canada to replicate and maintain in Canada any data related to the Canadian operations of the financial institution that is transferred outside of Canada. The USMCA includes a provision that prohibits local data storage requirements, so long as the financial regulators have direct and immediate access to data stored outside its territory. Canada has a transition period of one year after entry into force to bring its measures into conformity with the USMCA data provisions. The Canadian Government noted in its “Canadian Statement on Implementation” online publication that the Department of Finance, the Office of the Superintendent of Financial Institutions, and the Canada Deposit Insurance Corporation will work during the one-year transition period to develop the necessary regulations to ensure compliance with respect to eligible foreign financial institutions that elect to store their records outside of Canada.
Foreign ownership of transmission facilities is limited to 20% direct ownership and 33% through a holding company, for an effective limit of 46.7% total foreign ownership of certain suppliers of facilities-based telecommunications services (i.e., those that have more than 10% market share), except submarine cable operations. Canada has one of the most restrictive regimes among developed countries. Canada also requires that at least 80% of the members of the board of directors of facilities-based telecommunications service suppliers be Canadian citizens. Because of restrictions on foreign ownership, the role of U.S. firms in the Canadian market as wholly U.S.-owned operators has been limited to that of resellers, dependent on Canadian facilities-based operators for critical services and component parts.
The Canadian Radio-television and Telecommunications Commission (CRTC) imposes quotas that determine both the minimum Canadian programming expenditure (CPE) and the minimum amount of Canadian programming that licensed Canadian broadcasters must carry (Exhibition Quota). Large English language private broadcaster groups have a CPE obligation equal to 30% of the group’s gross revenues from their conventional signals, specialty, and pay services.
In March 2015, the CRTC eliminated the overall 55% daytime Canadian-content quota. Nonetheless, CRTC maintained the Exhibition Quota for primetime at 50% from 6:00 p.m. to 11:00 p.m. Specialty services and pay television services that are not part of a large English-language private broadcasting group are now subject to a 35% requirement throughout the day, with no prime-time quota.
For cable television and direct-to-home broadcast services, more than 50% of the channels received by subscribers must be Canadian channels. Non-Canadian channels must be pre-approved (“listed”) by the CRTC. Upon an appeal from a Canadian licensee, the CRTC may determine that a non-Canadian channel competes with a Canadian pay or specialty service, in which case the CRTC may either remove the non-Canadian channel from the list (thereby revoking approval to supply the service) or shift the channel into a less competitive location on the channel dial. Alternatively, non-Canadian channels can become Canadian by ceding majority equity control to a Canadian partner, as some U.S. channels have done.
The United States is monitoring Canada’s implementation of USMCA commitments to allow for the cross-border supply of U.S. home-shopping programming.
The CRTC also requires that 35% of popular musical selections broadcast on the radio qualify as “Canadian” under a Canadian Government-determined point system.
The CRTC’s Wholesale Code entered into force in January 2016 and governs certain commercial arrangements between distributors (e.g., cable companies) and programmers (e.g., channel owners). The Code is binding for vertically integrated suppliers in Canada (i.e., suppliers that own infrastructure and programming) and applies as guidelines to foreign programming suppliers (who by definition cannot be vertically integrated, as foreign suppliers are prohibited from owning video distribution infrastructure in Canada).
U.S. broadcasters have complained about Canadian cable and satellite suppliers picking up the signals of U.S. stations near the border and redistributing them throughout Canada without the U.S. broadcasters’ consent. Content owners (including broadcasters who develop their own programming) can apply for compensation for the use of such content in Canada from a statutorily mandated fund into which Canadian cable and satellite suppliers pay. However, U.S. broadcasters consider this compensation, which was recently reduced, to be insufficient, and have sought the right to negotiate the carriage of their signals on commercially set rates and terms, as can be done in the United States. The United States will continue to explore avenues to address these concerns.
The Investment Canada Act has regulated foreign investment in Canada since 1985. Foreign investors must notify the Canadian Government when acquiring a controlling interest in an existing Canadian business or starting a new business. Innovation, Science and Economic Development Canada is the government’s reviewing authority for most investments, except for those related to cultural industries, which come under the jurisdiction of the Department of Heritage Canada. Investors with investments below certain thresholds have the option to delay reporting for up to 30 days after implementation. Generally, investments above those thresholds are assessed based on whether they are of “net benefit” to Canada and must wait for affirmative approval before implementation.
On June 22, 2017, a provision entered into force to increase the threshold for pre-implementation review to C$1 billion (approximately $766.5 million) from C$600 million (approximately $459.9 million) for investors that are from countries that are Members of the WTO and that are not state-owned enterprises (SOEs). Subsequently, on September 21, 2017, the threshold for review was increased to C$1.5 billion (approximately $1.15 billion) for investors that are not SOEs from countries that are party to certain designated trade agreements with Canada, which now includes the USMCA. These thresholds are adjusted annually. The thresholds for 2021 are C$415 million (approximately $305 million) for SOE WTO investments, C$1.043 billion (approximately $766.5 million) for private sector WTO investments and C$1.565 billion (approximately $1.15 billion) for private sector trade agreement investments.
For more information, refer to the United States Trade Representative’s 2021 National Trade Estimate Report on Foreign Trade Barriers.
Barriers to Digital Trade
Privacy Legislation and Data Localization
On November 17, 2020, the Government of Canada introduced the Digital Charter Implementation Act (DCIA) (Bill C-11), which updates Canada’s privacy legislation. The DCIA increases protections for personal information and gives more control to consumers with data portability and deletion rights and creates transparency around how companies use consumers’ data. The government intends to introduce the Consumer Privacy Protection Act (CPPA) under the DCIA, which would give the Privacy Commissioner the ability to force a company to stop collecting data or using personal information and allow for penalties up to 3% of global revenue or $10 million, and 5% of global revenue or $25 million for egregious non-compliance. The proposed Digital Charter Implementation Act would repeal parts of the existing Personal Information Protection and Electronic Documents Act. It will include the heaviest fines among G7 countries for privacy laws.
Several provinces, including Ontario, British Columbia and Québec have also started reviewing their privacy legislations. In June 2020, Québec introduced a highly controversial bill (Bill 64), to modernize its privacy legislation. The United States has urged Canada to ensure that these (and any other) legislative proposals do not place restrictions on the cross-border transfer of data that would conflict with the obligations set forth in USMCA, and will continue to monitor proposals and measures in effect at both the federal and provincial levels to ensure that cross-border transfer of data are not restricted in a manner inconsistent with Canada’s trade obligations. While these new laws have yet to be finalized, U.S. companies should be aware of their obligations regarding their Canadian clients’ data and ensure that they are compliant with any new legislation in Canada.
Regarding data flows, the provinces of British Columbia and Nova Scotia each have laws that mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies, such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies, from using U.S. services when there is a possibility that personal information would be stored in or accessed from the United States.
The Canadian Government continues to explore imposing a tax on revenues of companies providing digital services to, or aimed at, Canadians. The United States has expressed that it would cause serious concern if Canada adopts a unilateral digital services tax that unfairly targets American companies.