GHY Tradelines
In This Issue
Blanket Certificates of Origin Need to be Renewed for 2011
C-TPAT 2010 Partner Survey Results Released
International Trade Compliance Strategies Blog Launched
Customs Moving to Require Ocean and Rail Data Filing Through ACE
Economy at Moment of Truth: EDC Forecast
eManifest Update
FAA Issues Safety Alert on Lithium Batteries
Incoterms� 2010 Take Effect Jan. 1, 2011
CBP Chief Outlines 7 Principles for Agency's Success
No Change to Gender- and Age-Based Import Tariffs
Operation Global Hoax a Success
WTO Issues Trade Policy Review of US Trade Policy
DFAIT Issues New Guidelines on Encryption Controls
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Blanket Certificates of Origin Need to be Renewed for 2011
NAFTA Calendar

Blanket certificates of origin, whether for NAFTA or for other free trade agreements, are usually filled-out to begin on January 1 and to expire, 12 months later, on Dec. 31.

As happens every year, the majority of blanket certificates in our databases are set to expire Dec. 31.

If you have not already done so, please make sure that you obtain the required renewed certificates for 2011.

Shipments cannot be cleared under the preferential tariff treatment of a free trade agreement unless a current and valid certificate is on hand.

C-TPAT 2010 Partner Survey Results Released

U.S. CBP has published a detailed report of the results concerning their 2010 C-TPAT Member and Cost-Benefit Survey.

According to the report, the greatest C-TPAT impacts on business overall have included improvements in the field of workforce security, decreased time to release cargo by CBP, reduced time in CBP inspection lines, and increased predictability in moving goods. Importers identified an additional impact related to a decrease in disruptions to the supply chain.

Of all the potential intangible benefits, "increases security awareness" and "enhances security in supply chain" had the highest ratings. In each of these cases, roughly three quarters of all businesses considered them to be very important benefits.

Other intangible benefits from the C-TPAT program included "demonstrating corporate citizenship" and, "improving risk management procedures and systems".

International Trade Compliance Strategies Blog Launched
International Trade Compliance Strategies

This new site has been created to advance the concept of an Integrated International Trade Compliance Strategy and to engage in an ongoing discussion about this and other topics related to the field of trade regulation and compliance.

Heading up this project is Reynold Martens, chair IE Canada, Manitoba Chapter and Executive Vice President of GHY International, with other members of the GHY team and guest bloggers also contributing content. Our aim is to draw from the best resources available to provide you with a more complete understanding of this issue and the reasons why it should be of relevant concern to your organization in today's global trade environment.

We look forward to seeing you there and hearing what you have to say about any of the topics covered.

GHY Tradelines Gets a New Look & URL

Customs Moving to Require Ocean and Rail Data Filing Through ACE

U.S. Customs and Border Protection has issued a general notice concerning its plans to require advance ocean and rail shipment data to be transmitted through the Automated Commercial Environment.

CBP will begin a test of ACE filing of this information no earlier than Dec. 22 and will begin requiring it no earlier than March 22, 2011. The CBP notice provides a description of the test process, sets forth eligibility criteria for participation, opens the application period for participation and outlines the development and evaluation methodology to be used.

CBP states that once the initial group of participants has demonstrated the capability to operate in ACE in the active test stage it intends to expand the number of participants until all interested ocean and rail transmitters are participating. This expansion will be done on a rolling basis, beginning sometime around the start of the active test stage for the initial group of participants.

CBP's ultimate goal is the full transition of ocean and rail data transmission to ACE. As a result, shortly after the successful completion of this test CBP intends to publish in the Federal Register a notice announcing that ACE will be the only CBP-approved electronic data interchange for submitting advance ocean and rail data. This step will occur no earlier than March 22, 2011.

Economy at Moment of Truth: Export Development Canada Forecast
Recession Factors

The unexpected slowdown of the global economy is ushering in the greatest test of the recession according to Export Development Canada's (EDC) Autumn 2010 Global Export Forecast released earlier this week.

"Slower growth has taken the world by surprise; the sharp, six-month rebound that began a year ago persuaded many that recovery was in full swing," said EDC Chief Economist Peter Hall. "The global economy got very quiet out there mid-way through this year, and it's going to be weak for some time. Recovery is still at least a year away, and navigating though this period will be challenging -- a moment of truth for the world economy."

EDC's forecast calls for Canadian export sales to remain 11 per cent below the pre-recession peak, with emerging weakness crimping sales growth in the coming months and holding the increase in 2011 to single digits. Weakness is expected to be widespread, affecting export sales in most industrial sectors. EDC believes that export growth will edge down from 11 per cent this year to just 6 per cent in 2011.

"Managing through the upcoming slow months and a continued high dollar will require ingenuity and grit," Mr. Hall said. "Slower growth promises even more intense competition, and the world's largest economies, facing weak domestic conditions, are embarking on new export-led strategies aimed at more favorable demand elsewhere."

eManifest Update

Following a one month delay, the CBSA's eManifest initiative begins at the end of October on a voluntary basis for cross-border highway traffic into Canada. As of this date, the CBSA describes as the "generic itinerant highway carrier mode" will start being gradually phased out of existence.

In order to prepare carriers and drivers now using the aforementioned generic code 77YY, the CBSA has established a transition period lasting until March 31, 2011 during which time unique carrier codes required by the eManifest program can be applied for. After that date however, all highway carriers engaged in cross-border trade must have a CBSA-issued carrier code.

Although eManifest will not take place in an enforced manner until sometime in 2011, carriers have been strongly encouraged to voluntarily participate as quickly as possible.

Under the new program, highway carriers bringing commercial goods into Canada will be required to provide the CBSA with cargo and conveyance information in electronic format at least one hour prior to arrival at the border. This can be done utilizing their own EDI capabilities or through the services of third-party providers. Additionally, the CBSA has promised delivery sometime next year of an electronic portal to help facilitate the processing of eManifest transactions.

FAA Issues Safety Alert on Lithium Batteries
Lithium Batteries

Earlier this month, the U.S. Federal Aviation Administration alerted airlines of the results of new research on risks associated with transporting lithium batteries as cargo on aircraft, and recommended actions to reduce those risks.

In a Safety Alert for Operators the FAA summarized recent research, which shows that lithium metal (non-rechargeable) and lithium-ion (rechargeable) batteries are highly flammable and capable of igniting during air transport under certain circumstances.

FAA research also indicates that Halon 1301, the suppression agent found in Class C cargo compartments, is ineffective in suppressing lithium metal battery fires.

New rules under consideration may include new packaging and training requirements, and tougher guidelines for fire suppression equipment on aircraft that carry the batteries.

Leading Categories of Merchandise Traded
Canada and China
China-Canada Trade

Imports from China

1. Electrical machinery and equipment
2. Boilers, mechanical appliances, etc.
3. Toys, games, sports equipment
4. Furniture and stuffed furnishings

Exports to China

1. Oil seeds and misc. fruit, grain, etc.

2. Woodpulp; paper or paperboard scraps
3. Ores, slag and ash
4. Mineral fuels, oils

Source: Trade Data Online. Industry Canada. May 2010.

GHY E-Newsletter Issue #12 October � 2010
Incoterms� 2010 Take Effect Jan. 1, 2011

New rules reflect the latest developments in commercial practice and post 9/11 cargo security modifications

ICC Incoterms� (short for International Commercial Terms) are global rules that clarify the costs, risks, and responsibilities of both buyers and sellers. Developed by International Chamber of Commerce and used by companies to move goods around the world, ICC Incoterms� have become the standard in international business rules setting.


Incoterms� 2010 is the eighth revision of Incoterms� since their inception in 1936. During its revision process over the past 2� years, international business and legal experts considered more than two thousand recommendations from many of the 130+ countries with which the ICC has a relationship. As a result, this latest revision takes into account the post 9/11 cargo security regulations and new Institute Cargo Insurance Clauses. Delivery, so critically important for revenue recognition compliance, is also addressed in far greater detail.

American users have a particular stake in the new Incoterms� 2010 rules. In 2004 the shipment and delivery terms formerly found in parts 2.319 through 2.324 of the Uniform Commercial Code were deleted. Free of the "FOB confusion" found in the old UCC terms, Incoterms� rules make a logical replacement. According to the ICC, Incoterms� 2010 rules are far more amenable to US domestic use than any previous version -- a claim that is not universally accepted by all experts, however.

In contrast to the previous four classes, E,F,C and D in the 2000 version, Incoterms� 2010 is now separated into two groups: those applicable to all modes of transport and those only applicable to sea and inland waterway transport. There will now be a total of 11 terms instead of 13, with two new additions, DAP and DAT and four deletions, DAF, DDU, DEQ and DES.

The official Incoterms� 2010 book is available for purchase at the ICC's website (it's currently out of stock at the time of writing, but ICC indicates they aim to fulfll orders by the end of October).

For more information about the Incoterms� 2010 rules we have posted two videos on our Tradelines news site. Presented by Lance Scoular ("The Savvy Navigator"), founding partner and CEO of Australian consulting firm Key Directions, the videos provide a brief overview of the new Incoterms� 2010 rules and terms and a concise explanation of the rationale behind the revisions.

CBP Chief Outlines Seven Principles for Agency's Success

Bersin says facilitating trade as important as preventing terror

The chief of US Customs and Border Protection (CBP) outlined seven principles that guide his agency in a speech at the Migration Policy Institute in Washington, DC, earlier this month, emphasizing that the facilitation of legitimate trade and travel is as important to national security as keeping terrorists out of the country.

CBP Commissioner Berson
CBP Commissioner Alan Bersin noted that the first principle to guide his agency to securing the nation is the targeting of CBP enforcement efforts. In this regard, he praised the two National Targeting Centers, located in Herndon, Va., one of which screens cargo and the other people. The robust databases and powerful search engines at the National Targeting Centers assists with fulfilling a national inability cited by the 9/11 Commission to "connect the dots," Bersin declared.

As 99 percent of people and cargo entering the United States are doing so legitimately, it becomes important to focus security resources on those people and goods most likely to represent a threat, Bersin explained.

"Finding the high-risk person or high-risk cargo is akin to finding a needle in a haystack," he commented. "There are two ways you can locate a needle in a haystack. Either you have very specific intelligence that allows you to go into the haystack and pull out the offending needle or you could reduce the size of the haystack. In fact, you do that by distinguishing between risks and segmenting traffic between those cargo and people about which you know something and those about which you have derogatory or insufficient information."

Following this strategy, CBP focuses its inspection resources on those for which it lacks enough information to make a positive judgment.

The second principle guiding CBP is the secure flow of people and goods is key to success at CBP and the entire Department of Homeland Security (DHS).

With a strategic border management framework, border security has advanced beyond merely protecting an imaginary line in the sand, Bersin remarked. Rather, CBP proactively looks as far away from the border with regard to distance and as early as possible with regard to time as people and goods approach US borders.

"The sooner we can make an assessment of security threats, the sooner we can focus on those things and people that we have to inspect most intensively at the border, and thereby we can engage in the risk segmentation that I've indicated is essential to the modern border management theory of managing risk," Bersin stated. "We don't open every trunk at the border. We don't inspect every one of the 12 million containers that come into our ports. But we do so based on risk assessments and targeting, using data and using search engines that permit us to translate threat streams in searches through our databases."

The third principle guiding CBP efforts is the securing of key hotspots along the US southwestern border with the maintenance of strategies for securing the US northern border and east and west coastal borders being the agency's fourth principle. CBP must tailor its approaches to meet the unique challenges, threats, and opportunities presented not only to the north and south but also the littoral or maritime borders, Bersin said.

Fifth, CBP must make smart use of advanced technologies to secure US borders, Bersin said. These technologies include surveillance systems, communications systems, and UAVs.

Sixth, it is important for CBP to embrace the fact that trade is key to an economically prosperous and competitive country, Bersin said. Indeed, trade and security are intrinsically linked, he stressed.

"While much attention to CBP's border security mission, it is important to recognize that international trade is as much a matter of national security as keeping terrorists out of country," he stated.

Finally, expanding information infrastructure, technology partnerships, and human capital are key to accomplishing CBP's missions, Bersin contended.

Bersin recently stood up the CBP Office of Technology Innovation and Acquisition (OTIA), to improve the integration of technology management and procurement at the agency. "CBP has engaged in several large-scale technology integration projects... that have not been produced on time or on budget," Bersin acknowledged. OTIA will help those projects, like the Secure Border Initiative Network (SBInet) and the Automated Commercial Environment (ACE), work better with each other and other agency efforts.

A video of Commissioner Bersin's complete speech can be viewed on our Tradelines news site here.

CFIA: New Requirements for Importing Fresh Fruit and Vegetables HS Codes Starting with 07 and 08

Attestation of CFIA federal produce licence number or Dispute Resolution Corporation (DRC) membership number now required

Under the Licensing and Arbitration Regulations, Canadian purchasers of fresh fruit and vegetables are required to be licensed with the CFIA and/or be a member of the DRC, if they are not exempt from the Regulations.
Effective December 1, 2010, importers submitting information for paper release will be required to enter the above information on the Confirmation of Sale (COS) form in box 22.

Importers transmitting information through Electronic Data Interchange (EDI) will be required to enter their federal produce licence number, their DRC membership number or indicate that they are exempt from the requirements of the Licensing and Arbitration Regulations in the "Registration Requirements" field. In those cases where the importer is a non-resident importer, the Canadian consignee's federal produce licence or DRC membership number must be entered.

According to the CFIA, the new requirements will improve the information available regarding the identity of the importers and traceability of product.

If you wish to confirm your CFIA federal produce licence number, please refer to the CFIA website following the "Food" and "Fresh Fruit and Vegetable" links, or contact Manon Dicaire at Information in regard to a DRC membership number can be obtained from Dawn Hughes at or by consulting the FVDRC website.

No Change to Gender- and Age-Based Import Tariffs After Supreme Court Declines Review

The Supreme Court brought to at least a temporary halt this month an effort to challenge the different duty rates the U.S. assesses on certain imports based on whether they are for men or women (gender-based) or adults or children (age-based). The Supreme Court's decision not to hear the test case Totes-Isotoner Corp. v. U.S. means that these varying tariffs will remain in place for the time being. It also lets stand a lower court ruling that will make it more difficult to pursue any future effort to overturn these duties.

The Totes case was filed with the U.S. Court of International Trade in 2008 in an attempt to level the tariff rates imposed on wearing apparel, gloves, footwear and similar articles. There are numerous examples in the Harmonized Tariff Schedule of the U.S. of higher duty rates being imposed on such items based solely on the gender, and sometimes the age, of the wearer. For example, women's leather upper footwear carries a 10 percent duty rate compared to 8.5 percent for similar footwear for men. In addition, men's seamed leather gloves are subject to a 14 percent duty while the rate for similar gloves for women and children is 12.6 percent. Totes argued that this dichotomy violates the right to equal protection under the U.S. Constitution.

In its initial ruling, the CIT dismissed Totes on technical grounds. The court said that to bring a successful challenge an importer must show that the government's enactment of the different duty rates was purposefully intended to discriminate against the actual users of the goods on the basis of gender or age. These duties are not discriminatory simply because they differ, the court noted, and importers challenging their constitutionality must do more than just show that they have a disparate impact on the associated purchasers. On appeal, the U.S. Court of Appeals for the Federal Circuit upheld this reasoning.

At the same time, both courts left the door open for future challenges. They rejected the government's argument that setting duty rates is a "political question" and therefore precluded from judicial review. They also confirmed that importers who pay the discriminatory duties have a sufficient stake in the cases (i.e., standing) to bring a constitutional challenge without having to involve individual purchasers of the affected goods. Finally, the CAFC described the evidence needed to successfully establish a claim of discrimination. Although this standard imposes a significant burden of proof on importers, now that Totes is final those who have filed similar lawsuits will have the opportunity to amend their complaints in an attempt to satisfy that burden. It remains to be seen, however, whether any such changes will be made and whether the challenge to these tariff rates will continue.

Operation Global Hoax a Success

Mountains of pirated and counterfeit CDs and DVDs seized in global customs enforcement operation

The World Customs Organization (WCO) and the National Intellectual Property Rights Coordination Center (IPR Center) announced earlier this month the seizure of tens of thousands of pirated and counterfeit CDs and DVDs at international mail facilities and express courier depots in the course of a global operation.

Forty-two countries participated in Operation Global Hoax, which aimed to stem this growing trade and stop these economic saboteurs from using postal and courier channels to move their illegal goods around the world.

CBP Intellectual Property
As of early October, thirty Customs administrations had reported their final results while resulting investigations remain ongoing. More than 782 parcels were seized, yielding in excess of 142,000 DVDs and 28,000 CDs.

Customs also seized more than 271,000 other counterfeit items, including razors, pharmaceuticals, curling irons, household goods, watches, mobile phones and accessories, clothing, computer accessories, jewelry, video game gadgets, MP3/MP4 players and various leather goods.

Some Customs administrations went even further; raiding street markets selling counterfeit and pirated goods, either on their own or in collaboration with other enforcement agencies. These informal markets have become a common point of sale for counterfeiters, offering a "supermarket" of illegal goods, including pyramids of DVDs and CDS.

"Using postal and express courier channels to move tens of thousands of counterfeit and pirated goods around the world is increasingly being exploited by criminal traders," said Secretary General of the WCO, Kunio Mikuriya. "Operation Global Hoax, which targeted the use of this means of transport for illegal goods yielded outstanding results, and is a clear demonstration of the Customs community's resolve to fight these global gangsters in partnership with all our key stakeholders."

Over $5 million worth of counterfeit and pirated DVDs and CDs were seized in the United States alone by Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) who played an active role in the operation as partners of the IPR Center, one of the U.S. government's key weapons in the fight against intellectual property theft.

"The smuggling of counterfeit goods robs Americans of jobs, steals the creative content of our artists and diverts legitimate revenue from responsible industries to the pockets of organized crime," said Director, John Morton of U.S. Immigration and Customs Enforcement, which manages the IPR Center. "We thank the WCO for agreeing to coordinate this operation and facilitate the cooperation of so many member countries."

Global Hoax was coordinated by the WCO, which facilitated the sharing of information and made available CENcomm -- its secure communication tool -- to participating administrations for exchanging data on pirated and counterfeit products seized.

WTO Issues Trade Policy Review of the United States

Export promotion efforts should be complemented by reduction in remaining market access restrictions and other distorting measures

The World Trade Organization (WTO) recently issued a

trade policy review analyzing the economic environment, trade and investment regime, and trade policies and practices of the United States. These types of reviews are conducted on a regular basis for all WTO members, and every two years for the U.S. as one of the four WTO members with the largest share of world trade.
As in its previous review of the U.S., the WTO highlights the openness and transparency of the U.S. trade and investment regime and commends the U.S. government for resisting pressures to respond to the global economic downturn by adopting protectionist measures. The WTO believes that the restraint shown by the United States helped avoid a worldwide slide into protectionism.

The WTO observes that border measures such as tariffs and quantitative restrictions have remained broadly unchanged since 2007, which highlights the stability of the U.S. trade regime. The limited changes made to trade border measures during 2008-2009 involved mostly contingency measures such as the safeguard duties imposed in September 2009 on certain tire imports from mainland China. The U.S. also had 246 AD duty orders in place as of December 2009, 22 more than in December 2007. AD investigation initiations in 2008-2009 remained well below the peak of 2007 but CV investigation initiations almost tripled during the period as a direct result of the decision by the DOC to change its long-standing policy of not applying CV duties to mainland Chinese goods.

The United States applied a simple average most-favoured-nation tariff rate of 4.8 percent in 2009, unchanged from 2007. While the average MFN tariff applied by the United States remains relatively low compared to most other countries, high tariffs have sheltered a number of U.S. sectors from international competition, including textiles, apparel, footwear and leather. Footwear and headgear had the highest average tariff rate among Harmonized System sections in 2009 at 13.9 percent, followed by prepared foodstuffs and beverages at 12.1 percent, live animals and products at 9.7 percent, and textiles and apparel at 9.0 percent.

DFAIT Issues New Guidelines on Encryption Controls

Changes are intended to make administration of the controls more efficient without compromising Canada's national security and international commitments

On October 19, 2010, the Export Controls Division of Foreign Affairs and International Trade Canada (ECD) released new information on its policies regarding the application for and granting of permits for the export or transfer of information security goods, software and technology. Canada imposes controls on transfers of these items to all countries other than the United States.

Trusted Platform Module
In response to significant concerns expressed by the Canadian business community regarding the impact of these controls on their competitive position in the international marketplace, ECD has attempted to strike a balance between facilitating the permit process while still complying with Canada's international commitments in this area.

The following is a summary of the key points in ECD's new guidelines.

1) Multi-destination Permits Available to Exporters

ECD has identified a number of "multi-destination" permits that are now available to exporters of cryptographic items. These allow for exports to multiple destination countries without consignees being specified in the application. These permits differ according to the cryptography products that are intended to be exported and the terms and conditions that apply to the use of these permits.

It should be noted that while intended to offer some flexibility in certain circumstances, these are not exemptions to the export control regime. Exporters must still apply for and obtain these "multi-destination" permits prior to exporting or transferring the covered cryptographic items.

2) Export Compliance Plan Is Now Required

Although it has always been very strongly recommended that exporters have a comprehensive compliance plan in place, ECD is very clear that any exporter seeking to rely on these more flexible "multi-destination" permits must have such a plan.

ECD states that this must consist of defined or prescribed processes and procedures to ensure that employees at all levels of a company understand and act in accordance with the letter and spirit of the applicable export requirements under the Export and Import Permits Act, the Customs Act, and other trade-related legislation, including economic sanctions.

ECD requires that such a plan establish the steps and due diligence process a company follows when planning, marketing, and shipping items included in the Export Control List to foreign clients, and should also cover download practices. It must provide for a "defined process to provide a reasonable level of assurance (due diligence) that goods or technology may not be exported to unauthorized or illegitimate end-uses or end-users."

3) Application Review Periods

Applications for individual export permits (i.e., for the export to specified consignees in a single country) for cryptographic items in respect of many destination countries, including most European countries, Japan, South Korea, Australia and New Zealand, will be reviewed within 10 business days from the submission of a complete application. For exports or transfers to other destinations, that period is extended to eight weeks.

Applications for "multi-destination" permits will be reviewed within eight weeks of submission of a complete application.

4) Extended Validity Periods

Individual export permits for cryptography are usually valid for two years. Exporters may request a longer validity periods of up to five years. Individual applications may also be made to extend the validity period of existing permits by up to one year at a time.

The default validity period for multi-destination export permits for cryptography is typically two years, and exporters may request a longer validity period of up to five years. ECD notes that applicants whose product development cycles are shorter than two years may wish to request shorter validity periods since a new application will be required for new versions of a cryptography item.

The Bottom Line

Encryption controls are a challenge for many Canadian exporters. Failure to comply can have significant consequences, not just financial, but also to the company's business reputation. In many cases when product is detained or seized by the CBSA just prior to export because of compliance problems, the ensuing delays can strain customer relations and potentially result in lost sales. Accordingly, businesses that use or transfer encryption need to carefully study the new EDC guidelines, not just to ensure that they are in full compliance with the requirements, but just as importantly, to be certain they are utilizing all available options to maintain or enhance their competitive position internationally.

And Furthermore...

Finding time to follow the latest international trade developments and programs of Customs agencies on both sides of the border relevant to your business can be challenging, so we hope you find this issue of our
Tradelines e-newsletter to be a helpful resource in this respect.

As always, we'd greatly appreciate any opinions, comments and suggestions you may have to help us improve this information resource, so please don't hesitate to let us know what you think.

If you haven't already, we'd like to take this opportunity to invite you to check out our Tradelines E-News weblog where you can find current stories updated daily about business events and developments that are important to Canadian importers and exporters. Sign up for our RSS feed and get automatic updates to your favourite reader as soon as they're posted. As well, you can now follow GHY on Twitter for the latest information, updates and links to articles of interest.

The material contained in our Tradelines newsletter is provided for general information purposes only. Readers should seek specific advice from one of our qualified experts when dealing with individual situations. Editorial content may not necessarily reflect the opinion of GHY International.