After-Sales Service/Warranty Work and the Border: FAQs

Trade Update • April 14, 2021

Many Canadian companies that manufacture and sell industrial or commercial equipment, machinery or software to U.S. customers may not realize that under certain provisions of the United States-Mexico-Canada (USMCA) free trade agreement they are permitted to have their own technicians work temporarily in the U.S. as “business visitors” — meaning that no visa or special work status application is required.

Aside from avoiding the costly, time-consuming inconvenience and uncertainty of otherwise having to deal with U.S. Citizenship and Immigration Services, taking advantage of the USMCA temporary entry provisions enables Canadian firms to compete more effectively by providing their U.S. customers with a uniformly high level of after-sales service delivery.

Here are answers to a few common questions and concerns that companies have about the USMCA provisions – including steps for ensuring hassle-free cross-border travel and customs clearance.

Can all Canadian service technicians enter the U.S. as business visitors?

Not all technicians are covered by these provisions. In order to enter the U.S. as business visitors, the equipment, machinery or software the Canadian technicians are servicing must:

• be for commercial and industrial (not household or personal) use; and
• have been manufactured and purchased outside of the U.S.

As business visitors, Canadian service technicians cannot work on U.S. manufactured goods.

How do I prove that my equipment, machinery, or software was manufactured outside the U.S.?

If there is a question about where the goods were made, a copy of the original customs document or commercial invoice adequately describing the product should usually be sufficient for this purpose.

Additionally, if the product qualifies under the USMCA Rules of Origin, a completed Certificate of Origin should also be provided (or a NAFTA certificate for goods produced before July 2020).

When can Canadian service technicians enter the U.S. to work as business visitors?

Work as a business visitor must be carried out pursuant to:

• a warranty or after-sales service agreement that was part of the original contract; or
• such an agreement being part of an extension to the original contract.

What kind of work can Canadian service technicians do in the U.S. as business visitors?

As long as it is set out in the contract, Canadian service technicians can work in the U.S. as business visitors to:

• install, set up, and test the commercial equipment, machinery, or software;
• train or supervise U.S. workers on the commercial equipment, machinery, and software;
• supervise installers on the commercial equipment, machinery, and software;
• repair and service the commercial equipment, machinery, or software;
• perform software upgrades.

What work is not allowed? (Even if the service contract stipulates it.)

Canadian service technicians are not permitted to do the following work as business visitors, even if called for by the contract:

• operation of the equipment, machinery or software for production; or
• hands-on installation performed by construction or building trades.

Does the work have to be provided by the original equipment manufacturer(OEM)?

Canadian third-party service providers are allowed to carry out the work for OEMs as long as the sales, lease or rental agreement (or any extension of these) clearly indicates this. Service contracts entered into after the signing of the original sales/lease or rental agreement, however, are not be permitted.

How do I obtain entry to the U.S. to work as a service technician in a business visitor capacity?

In order for the Canadian service technicians to be allowed to work in the U.S. as a business visitor, they must be able to demonstrate that:

• they have the necessary knowledge and skill to carry out the work;
• the contract that covers the work being requested;
• the equipment, machinery or software was made outside of the U.S.;
• they have no intent to enter the U.S. labour market;
• their activity is international in scope; and
• their primary source of remuneration will remain outside of the U.S.

Can my service technician bring tools and parts into the U.S.?

This is actually a two-part question, so let’s deal first with the tools.

Tools

Under the USMCA, temporary admission is allowed for “professional equipment” (aka “tools of the trade”) provided they meet certain conditions. For example, the goods cannot be sold or leased while in the U.S. and must depart with the technician when returning to Canada (or within a reasonable time afterward).

Should the tools originate outside the USMCA region (e.g., precision screwdrivers from Germany), they may still be imported duty-free under a temporary bond pursuant to heading 9813.00.50 of the Harmonized Tariff Schedule, which covers “professional equipment, tools of trade, repair components for equipment or tools of trade… imported by or for nonresidents sojourning temporarily in the United States and for the use of such nonresidents.”

In terms of documentation, the technician should prepare an itemized list of the tools in question, including the country of origin and estimated value (based on the depreciated purchase price, age, condition, and so on).

Parts

With regards to any warranty parts coming into the U.S., these may be handled differently depending on the value involved:

• if the total value is US$800 or less, the parts may be entered duty-free as a

  de minimis

  shipment, commonly referred to as Section 321, without the need for a customs entry.

• if the value of the parts exceeds the de minimus threshold but is less than US$2,000, the goods accompanying the technician may be cleared on an informal entry, which does not require a customs broker.
• if the value is US$2,000 or more, a customs broker will need to submit a formal entry to clear the goods through U.S. customs and account for any duties payable. To simplify matters for their U.S. customers, in many cases the Canadian vendor will act as the “Importer of Record” in this respect.

U.S. customs requires you to provide documentation in the form of a commercial invoice covering the parts in question and, if applicable, you should also provide a USMCA Certificate of Origin. As no sale is involved, the value should be based on what the selling price to an unrelated company would otherwise normally be. You should also ensure that a statement is included on the invoice clearly indicating that the warranty replacement parts are goods provided at no cost, with a value declared for customs purposes only.

Considering the above, in order to avoid having personnel delayed unnecessarily in Customs, warranty parts with a total value of US$2,000 or more ideally would be shipped via commercial transport to the destination and cleared electronically through Customs and Border Protection (CBP) in advance of the technician’s arrival at the U.S. worksite.

Does the after-sales service and warranty work have to be spelled out in the original sales contract?

To take advantage of the USMCA’s temporary entry provisions, it is essential that the scope of the warranty service contemplated following the sale is clearly stipulated in the contract. This information may be included either in the original sales contract or in a subsequent extension providing for after-sales service and any work that will be covered under warranty.

Unfortunately, U.S. Customs and Border Protection does not provide any specific guidance for how these types of contractual provisions should be worded. Therefore, it is up to the manufacturer to ensure their contracts sufficiently describe the scope and specific nature of the after-sales service and warranty work.

Business visitors are required to present a copy of the original sales invoice and the related warranty and/or service agreement when entering the U.S.

What if my contract doesn’t contain specific wording that allows for the installation or service of the equipment, machinery, or software?

If the contract omits the necessary wording to allow for Canadian service technicians to perform installation or service work in the U.S., then the Canadian vendor must go through a complex, time-consuming, and costly immigration process to get their personnel into the U.S.

These processes (TN or L-1B work status, for example) can take days, weeks, or even months to complete, and all require the payment of additional filing fees. In some cases, none of the available options may not apply.

This underscores the importance of getting the contract right from the outset when it comes to addressing any service issues that are anticipated following the sale.

What if my U.S. customer needs service but the equipment is out of warranty and no longer covered by an after-sales service agreement?

A Canadian service technician’s ability to enter the U.S. only lasts as long as a warranty or after-sales service provision in the original contract, or for the duration of any extension to the original contract.

If a Canadian company needs to send a service technician to work on out-of-warranty equipment, machinery or software, the company will have to go through one of the complex immigration processes mentioned previously in order to get its personnel into the U.S.

Alternatively, the U.S. customer should investigate the option of shipping the out-of-warranty goods back to Canada using the “Repair and Return” customs provisions that allow for any applicable duties to be paid (at the preferential USMCA rate) only on the cost of repairs.

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Need More Information?

Should you have any questions that we missed about the USMCA’s temporary entry provisions, don’t hesitate to contact us:

• Bob Cowie, Vice President of Global Trade Services | GHY International | E: bob@ghy.com | Ph: (204) 947-6700 ext. 237
• Reis Pagtakhan, Immigration Lawyer | MLT Aikins | E: rpagtakhan@mltaikins.com | Ph: (204) 957-4640
• Jessica Jensen | Foreign Legal Consultant | MLT Aikins | E: jjensen@mltaikins.com | Ph: (204) 957-4626