Introduction – Notice of Enforcement
In August 2011, the Canada Border Services Agency (“CBSA”) issued a notice on the enforcement of cabotage laws restricting the movement of domestic goods by foreign-based commercial transportation businesses (see Canada Border Services Agency, Customs Notice 11-014 dated August 25, 2011). If officials have not strictly enforced the laws in the past, this may be changing. Consequences for non-compliance include detentions, the assessment of duties, taxes, interest, penalties, cancellation of a carrier’s enrolment in trusted trader programs such as Free and Secure Trade and Customs Self Assessment, forfeiture, ascertained forfeiture and/or criminal liability. The following describes what commercial trucking and transportation businesses need to know about Canada’s cabotage laws.
Duty-Free Entry of Foreign-Based Trucks and Trailers
The duty-free entry of foreign-based trucks and trailers used for international commercial transportation is permitted under conditions. In particular they must: (a) be owned or leased and imported by a foreign-based person; (b) leave from and return to the foreign country in the normal course; (c) be controlled from the foreign country; and (d) be exported within 30 days of the import (or for a period not exceeding 24 months where the export of the truck is delayed in specified circumstances). They may also be used for the commercial transportation of goods from one point in Canada to another point in Canada under conditions. In particular: (a) the transportation must be incidental to the international traffic of the imported or exported goods; (b) the transportation must not occur outside Canada; and (c) the truck must not enter Canada for an in-transit movement through Canada to a point outside of Canada.
Moves qualify as incidental moves under the following conditions: (a) “minor deviations” may be made from the international route; (b) one incidental move may be made per international trip in order to pick up or drop off domestic goods while carrying less than a full load of imported goods or goods to be exported; and (c) the incidental domestic move must occur during or immediately before or after the international move. For example, a foreign-based truck and trailer entering Canada could pick up goods in Oakville, Ontario and drop them off in Toronto, Ontario en route to Markham, Ontario. Duty-free entry would not be permitted to facilitate the pick-up of goods in Hamilton, Ontario for delivery in London, Ontario (a major diversion).
No Transportation Outside Canada
A foreign-based truck and trailer does not qualify for duty-free entry into Canada if it will leave Canada during the trip. For example, a foreign-based truck and trailer would not qualify for duty-free entry to haul goods Detroit, Michigan to Fredericton, New Brunswick if the truck will pick-up goods in Toronto and travel through Maine and Vermont to reach Fredericton.
No Transportation Destined Outside Of Canada
A foreign-based truck or trailer that has entered Canada duty-free, loaded with goods in transit to a point outside Canada, is not permitted to carry domestic goods within Canada. For example, a foreign-based truck and trailer would not qualify for duty free entry into Canada to haul goods from Seattle, Washington to pick up goods in Vancouver, British Columbia, drop them off in Prince George, British Columbia, and then travel to Anchorage, Alaska.
A foreign-based truck may be used to move goods between two Canadian points following delivery of a load of imported goods, if the vehicle is en route to pick up a scheduled load of goods for export from Canada. The following conditions apply: (a) the export load must be scheduled for pick-up when the contract for the domestic load is made; (b) the drop-off point for the repositioning load must be in line for the pick-up of the export load; and, (c) only one repositioning move is permitted. For example, an foreign-based truck and trailer hauling goods from New York, New York to Ottawa, Ontario could schedule the pick-up of an export load in Montreal, Quebec for delivery in Boston, Massachusetts. After delivery to Ottawa, the truck and trailer could be used to load goods in Ottawa, Ontario for drop-off at Rigaud, Quebec (since Rigaud, is located between Ottawa and Montreal on the most direct trucking route.)
Foreign-based shipping containers may be imported into Canada duty-free where: (a) the transportation does not occur outside Canada; and (b) the container has not entered Canada for in-transit movement through Canada to a point outside of Canada. Containers must be exported within 365 days of the date of their import (or for an additional period not exceeding 24 months where the export of the containers is delayed for specified reasons). For example, a foreign container arriving in Vancouver, British Columbia from Hong Kong can enter Canada duty-free to haul domestic goods within Canada. However, a foreign container loaded with goods in Boston, Massachusetts, topped up with domestic goods in Kingston, Ontario for delivery to Toronto, Ontario and destined for Flint, Michigan does not qualify.
The North American Free Trade Agreement (“NAFTA”) indicates that foreign drivers may enter Canada without a permit as business visitors. Drivers may transport goods or passengers to Canada from a NAFTA territory (the U.S. or Mexico), or load and transport goods or passengers from Canada to a NAFTA territory. However, it does not authorize a foreign driver to load and unload domestic goods in Canada. A foreign truck driver must meet other conditions in order to qualify as a business visitor including: (a) the driver must be an American or Mexican citizen; (b) must show that the purpose of the trip is international; (c) that she or she is not seeking to enter the local labour market; (d) that the primary source of remuneration for the work is outside Canada; and (e) that the principle place of business is outside of Canada.
Summary - Moving Forward
The CBSA has signalled plans to more vigorously enforce cabotage laws affecting the trucking industry. This may have been triggered by suggestions that Canadian enforcement has been lax when compared to American enforcement. Businesses involved in the transportation of goods into Canada can steer clear of costly issues by reviewing corporate practices, and determining whether or not they are compliant with Canadian customs and immigration laws.