For both practitioners who advise and represent clients under Canadian trade laws, as well as the clients subject to those laws, the past 18 to 24 months has been a period of significant activity and developments, creating new pitfalls to be avoided and new opportunities to be exploited.
While Canada has a relatively modest record of successfully negotiating bilateral and plurilateral trade agreements, 2014 marked two very significant achievements on the trade treaty front, with the completion of negotiation of the Comprehensive Economic and Trade Agreement (CETA) with the European Union in August 2014 and the signing of the Canada-Korea Free Trade Agreement (CKFTA) in September 2014.
In terms of both its scope of coverage and its obligations, CETA is the most ambitious and expansive trade agreement that Canada has negotiated to date. Among the key outcomes are the following:
- Canada has agreed to significant modernizations and expansions of its regime for the protection of intellectual property rights, including providing "patent term restoration" for pharmaceutical products and implementing the 2012 Copyright Modernization Act to bring Canada's copyright regime into conformity with two World Intellectual Property Organization treaties.
- Canada has agreed to provide access as well as substantive and procedural rights to bidders on a wide range of procurements at the federal, provincial and municipal levels, including notably a significant number of major provincial energy and mass transit procurements.
- Canada and the EU have agreed to zero tariff rates immediately upon CETA coming into force for 98% of EU tariff lines and 98.4% of Canadian tariff lines, with three, five and seven year transition periods for certain "sensitive" goods, including ships, autos and certain agricultural goods (note that tariff-rate quotas will still continue to apply beyond the transition period for certain agricultural goods).
Both CETA and CKFTA will now go through ratification processes, which will include drafting and vetting of implementing legislation. A key remaining uncertainty with respect to CETA ratification, which could cause further delay to CETA's official entry into force, is whether CETA will require ratification by each of the EU member states as well as the EU.
2014 was a significant year for Canada in the area of investment treaties, with the announcement of Canada's ratification of the Canada-China Foreign Investment Promotion and Protection Agreement (CCFIPA). The CCFIPA entered into force on October 1 2014 and contains many of the standard hallmarks of bilateral investment treaties in terms of both scope and substantive obligations, including national treatment (post-establishment), most-favoured nation treatment (pre- and post-establishment), minimum standard of treatment, transparency, performance requirements, transfers and expropriation. The CCFIPA also contains standard carve-outs, including for Canada's foreign investment review regime which contains special guidelines for investments by state-owned enterprises. The CCFIPA promises to be an important and potentially well-used tool as the foreign direct investment links between Canada and China continue to grow.
One of the more significant distinguishing factors of Canada's Harper government in comparison to past Canadian governments has been its use of economic sanctions as a tool of foreign policy. The Harper government has been a regular user of Canada's Special Economic Measures Act to implement sanctions regimes which go beyond UN-based sanctions and which can even differ from US sanctions measures in material respects. In light of these differences and other particular laws such as Canada's blocking legislation against US sanctions against Cuba under the Foreign Extraterritorial Measures Act, multinational companies with ties to Canada are cautioned against adopting a "one size fits all" approach to sanctions (or export controls) compliance.
Over the course of 2014, Canada has announced and implemented a series of economic sanctions measures of increasing scope and severity against Russia in response to Russia's aggression and violation of the sovereignty of the Ukraine. Canada's current sanctions include an asset freeze against an increasing list of "designated persons". The freeze prohibits persons in Canada or Canadians outside of Canada from dealing in any property held by or on behalf of a designated person or facilitating or providing financial or other related services in respect to such a dealing. The freeze also prohibits persons in Canada or Canadians outside of Canada from making any goods available or providing any financial or related services to or for the benefit of a designated person. The sanctions further prohibit persons in Canada or Canadians outside of Canada from engaging in a range of investment and financing dealings in relation to certain designated persons. Canada's sanctions measures against Russia also impose restrictions on certain sectors, including the financial and energy sectors.
Canada's sanctions regime against Iran is one of the most comprehensive and severe in the world. It consists of a dual set of regulations, one implementing UN-based resolutions on Iran and a second, more comprehensive regime under Canada's Special Economic Measures Act (SEMA), which was last expanded in May 2013. Subject to a limited set of exemptions, Canada's SEMA-based sanctions ban a broad range of activities and dealings involving Iran and persons in Iran, including all exports and imports, sales and purchases, investments, financial transactions and various services. The sanctions also prohibit a number of activities and dealings involving Iran's petroleum industry and contain a broad set of prohibited activities and dealings involving certain "designated persons". Companies with any ties to Canada (including non-Canadian companies with Canadian citizen employees) would be well advised to seek Canadian legal advice prior to conducting any activities or dealings that involve Iran or persons in Iran, either directly or indirectly.
2012 to 2014 has also been an extremely active period in Canadian trade remedies law, with the Canada Border Services Agency initiating a total of 12 antidumping and countervailing duty investigations during this time.
In April 2013, the Canadian government promulgated a regulation removing the automatic expiry time of December 2016 for assessment by the Canada Border Services Agency of the "market economy" status of Chinese and Vietnamese industrial sectors in antidumping investigations. This regulatory change will allow the CBSA to continue to assess the market economy status of China and Vietnam on a case by case beyond December 2016 on a case-by-case basis.
In November 2014, the Government of Taiwan filed a revised request for consultations under the WTO dispute settlement provisions, challenging various aspects of Canadian antidumping law and practice. Among the measures challenged by Taiwan are the methodology pursuant to which the CBSA determines and applies Ministerial Specifications (that is to say best/adverse facts available) to non-cooperative exporters and Canada's practice of not excluding individual zero-margin exporters from antidumping determinations and subsequent enforcement when the weighted average country dumping margin is above de minimis. Should Taiwan's WTO challenge proceed to a panel, the proceeding warrants close monitoring by all parties with an interest in Canadian trade remedies litigation enforcement, as it is the first direct WTO challenge to Canada's trade remedy framework.