Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Canadian Exports Facing Increased Scrutiny from CBP for “Problematic” Components

Posted May 25, 2016

In the wake of an increased number of trade remedy actions launched this year by the United States in response to the alleged dumping of various Chinese goods ranging from tissue paper to steel products, Washington law firm Arent Fox is reporting that many Canadian firms have lately been receiving notices from U.S. Customs requesting supporting information concerning their exported products’ country of origin.

Prompted by concerns that dumped goods are possibly being transshipped from China through third countries, including Canada, U.S. Customs and Border Protection (CBP) is aggressively stepping up its efforts to curtail evasion of special import measures using expanded powers afforded by newly enacted legislation, such as the Prevention and Evasion of Antidumping and Countervailing Duty Orders contained in the Trade Facilitation and Trade Enforcement Act.

This situation is creating a potential liability for Canadian firms, as Arent Fox explains:  

[C]ompanies in Canada may be supplying component parts from China or other countries assuming that their finished product would not be covered by such US trade concerns. In other circumstances, a US affiliate or other producer uses product from China, sends it to Canada for further manufacturing, but when it re-enters the US the problematic component can still fall under the scope of the initial US trade order.

In other words, companies in Canada should know that, under US law, every time subject or covered merchandise crosses the border it can be subject to the active orders and possible additional duties.

To ensure that their products are not unduly barred from the U.S. marketplace, Canadian exporters are advised to address CBP’s transshipment concerns “proactively and head-on” — either by establishing tracking systems to demonstrate that covered Chinese components are not used in the finished exported product; or if they are, then Agent Fox suggests that “a dynamic import compliance management program must be on the top of your next executive board meeting”.