MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in matters involving the North American Free Trade Agreement.
The following is a short introduction to the United States-Mexico-Canada Agreement (USMCA), and various aspects of its implementation under Canada's customs and trade laws.
In broad terms, the United States-Mexico-Canada Agreement (USMCA) provides for duty free trade between its member parties, namely Canada, the US and Mexico. However, this preferential status comes with various strings attached, namely the requirements relating to:
- Tariff classification
- Value for Duty
Generally, these requirements must be complied with in order for goods flowing between USMCA countries to be entitled to the USMCA preferential duty treatment (note that USMCA also addresses trade in services, intellectual property and investments).
Canada's Customs Laws
Domestically, Canada has implemented these USMCA requirements into its relevant customs laws, namely the Customs Act, its regulations and the Customs Tariffs.
Customs Penalties and Sanctions
Note that the Canadian laws implementing the USMCA preferential status impose penalties for violating the customs requirements. In addition to losing USMCA preferential status, importers and exporters face sanctions and penalties such as seizure, ascertained forfeiture, civil and criminal sanctions, and Administrative Monetary Penalties.
Cross-Border Investments Disputes
Finally, USMCA also contains detailed dispute resolution provisions, including those in Article 14 for resolving disputes relating to cross-border investments.
Under NAFTA, the 'Chapter 11' dispute resolution scheme was one of the most controversial parts of the agreement, dealing with both the mutual obligations that each NAFTA party owed to foreign investors, and the rules for resolving the disputes that arose from time to time. Importantly, it granted private corporations in one NAFTA country the right to sue a national government (i.e. the United States, Canada, or Mexico) through an arbitration process where it was alleged that a government's actions negatively affected the investor's rights under NAFTA.
However, Canada has chosen to opt-out of these provisions in the new agreement. This means that aggrevied investors have until July 1, 2023 to commence arbitration proceedings against Canada as part of the wind-down of NAFTA. This only applies in respect of investments made between January 1, 1994 and the termination of NAFTA, and in existence at the time that the new agreement came into force (July 1, 2020). Beyond this wind-down period, investors will have to seek recourse in Canadian courts.