A “new” internal Canadian government report (actually dated November 2008) identified limitations in Canada’s export reporting and highlighted concerns with compliance with export controls compliance. What this means for exporters is that export monitoring is going to become a high priority of the Canadian Government in order to correct the identified deficiencies. And what this also means for exporters is that export controls compliance should be audited and improved. In addition, any exporter that currently files paper notifications of exports will have to spend money to acquire software to commence paperless reporting of exports. Those exporters who are behind the times or who are not taking export compliance seriously will be facing costs to improve and fines and penalties if they do not.
The internal Government of Canada Report indicated that Canada Border Services Agency (“CBSA”) had allowed some strategic nuclear and military equipment to leave Canada without checking whether rogue countries or terrorists are the buyers. The internal evaluation found that exporters of controlled goods often file their paperwork with the CBSA at border crossings after hours and, therefore, without inspections.
One of the highlighted problems is that exporters continue to have a choice of submitting their export declaration in paper format. Paper forms are reported at a CBSA-designated export office where exporters use a self-serve stamp machine and reports are left unsecured after-hours at certain offices. If a declaration was submitted outside the CBSA’s hours of operation, there will have been no “verification.”
Most exporters in Canada file their declarations electronically ahead of shipping, allowing the CBSA to better manage inspections and to red-flag suspicious cargo. However, approximately 15% of all exports from Canada are reported on a paper form (known as the Form B13A Export Declaration, required for all exports regardless of whether the export is a controlled good). The standard export declaration requires the shipper to describe the goods in detail, and to provide the identity of the buyer and the country of destination. Export permit information is mandatory in the case of exports of controlled goods. The paper is not reviewed if left as an after-hours deposit. Even when deposited during operational hours, the report also found that some border officers have just two hours after a paper form is submitted to inspect the cargo, and that is often impractical as shipments can be located at warehouses spread out over several kilometres.
It is noteworthy that unlike Canada, the United States and the European Union require all export declarations to be made electronically in advance of shipping.
The internal report recommends that the CBSA develop a plan for implementing mandatory pre-departure electronic reporting of exports. The report calls for an end to antiquated paper forms, just as paper forms have been eliminated for import declarations in Canada since 2004. The report calls for the processes to be developed by October 2009.
Several reviews of the paper forms last year, based on samples, found that about half were for machinery and equipment, and that about half of the goods reported this way were non-compliant. “Non-compliant” can range from simple administrative errors to exporting controlled goods without a permit. CBSA spokeswoman Tracie LeBlanc, said a “high proportion” of the non-compliance was because of administrative errors.
CBSA investigators found that some truck drivers cheat by using the same photocopied paper form for different export shipments. More controls have been put into place for couriers and carriers.
Canada’s export control list, based in part on international agreements covering nuclear technology, requires permits for items that have potential military and strategic uses, such as sonar equipment or nuclear reactor parts. Canada’s top three export destinations are the United States, Japan and Britain.
As a result of the report and the concerns raised therein, there will be a heightened attention to export compliance. Past infractions may be identified. As a result, it may be prudent for companies to make voluntary disclosures of past mistakes before an audit or investigation by the CBSA.
Companies should also conduct internal audits to ensure that the policies and procedures are being followed to identify and communicate exports of standard exports and controlled goods. If internal policies and procedures are not in place, they should be developed as soon as possible with the assistance of persons knowledgeable in the area of Canada’s export and customs laws.