Tan Sukhera 00:00
dilatory fireside chats. Now before the pandemic, er folks used to get together especially on Fridays at lunch and they would network, they would have a chance to learn from their peers and troubleshoot, shoot different issues, brush up on tips. But now unfortunately, because the pandemic, it’s the thing of the past, but it’s in this spirit that we started Canadian regulatory fireside chats, there’s been a massive lack of information out there, especially in our social media feeds about the fantastic work that people in the space are up to. So we’re really proud to be part of the solution. This series is meant to be a platform for champions of industry, from government relations, policy and regulatory teams, to share their take on best practices, overcoming challenges and educating others. Now, if you’re a fan of the chats, please feel free to like, share and join into the conversation. So let’s look at the housekeeping rules. It’s a 30 minute session, there’s a q&a in the chat. The recording will be shared live after the event. If you’d like to live tweet, you can always tweet us hashtag fireside chats, and our handle is at no it. And if you’re interested in becoming a speaker, you can always send us an email to Hello at No att.com There’s always different topics and industries. And really the goal is to try and share as much insights as possible. On that note, I’m your host tanza Kara. I’m the VP of insights for Noah Inc. Now, we are always looking to improve and we’re eager to learn and also always welcome feedback. So now it’s time to, you know, talk about our speaker. You know, we’ve got a really exciting talk today, Episode 17. But just before we do that this talk is powered by NOAA Inc. So for those who don’t know, we’re a media regulatory and business intelligence company. We use AI and machine learning to actively search federal, provincial and municipal government sources of information online. This includes things like the hand SOG, the parliament, the posets, committees, debates, request for consultations, regulatory bodies, government agencies, live video feeds, and more. And you can visit www.no.com. So today, this talk is called International Trade compliance. At Canadian perspective, I’ve got Kevin riddle with me. He’s the director of trade and regulatory compliance for Tremco construction products group, where he’s worked for over 27 years. Now, while living in Canada has responsibilities taken to the United States of America and other parts of the world, including Europe, Asia and South America, Mr. Adel is responsible for International Trade compliance, including customs import export controls and sanctions, Kevin has co written the two part book Practical Guide to SAP GTs and volunteers for the SAP User Group, a SOG. In addition to speaking at numerous industry events, he’s also an active member of the global trade compliance community. Without any further ado, take it away, Kevin.
Kevin Riddell 02:44
Thank you for the introduction and for the opportunity to speak here, sorry, just going to share my screen. And I’m assuming that I did that properly. So again, thank you for the introduction. But just one clarification, I am here as just individual, this is just my personal views. So just to make the lawyers happy. Nothing that I’m saying today represents Trump goes perspective or views on international trade. This is just me as a Canadian citizen speaking based on my experience. Sorry, okay, I’ll get the hang of that the wheel on the mouse is just a little sensitive. So just quickly, what what I’m hoping to go through today here are what I wanted to talk to you about is Canada and their place in global trade. A quick look at some non Canadian rules that affect us as Canadians, when we trade globally. Some comments on Canada’s transparency, which I’ll explain when we get to that part. And then some actual examples of where rules may conflict, you, as a Canadian may be faced with foreign rules that disagree with the Canadian rules and some ideas of how to manage that. And at the end, as Dan said, there’ll be time for questions. So I’m not going to go into too much detail on any one subject because I don’t want to bore anyone. I find the stuff exciting, but I know not everyone does. But if anyone wanted more detail on any particular subject, please just reach out I’d be happy to I could go for hours. Just kidding. I won’t go for hours. So we’ll look at Canada as a global trader. Like most nations just about all Canada is a member of several key international bodies and agreements that standardized trade practices, such as the WTO, the World Trade Organization, which sets rules for trading internationally and how that should be done. The World Customs Organization which is more focused on the process of importing and export Working so that it’s how customs administration’s manage the import process. As a member of the UN, of course, there’s a number of committees and councils that Canada is part of a main one for me doing trade compliance is the United Nations Security Council, which sets sanctions that apply globally. And then Canada is also a member of other multilateral multinational groups that are not necessarily as big as the UN, such as the I believe it’s the organization for proliferation of chemical weapons that created the Chemical Weapons Convention that controls chemicals that can be used in the manufacture of weapons of mass destruction. And at a smaller level, Canada is a signatory to multiple free trade agreements like Uzma with the United States and Mexico, where they not only agreed to produce duty, but they set certain terms and conditions of trading with each other. So the good news of all this, why I mentioned it is that much of what you are faced with when you trade globally is going to look very familiar to you, because those customs administration’s for example, follow the WTO rules, just as much as Canada does. So you don’t need to be an expert in every nation’s customs rules and international trade requirements that you deal with, if you have a good handle on the global standards. And then of course, pay attention to key differences that might occur in country by country. And as on that subject of differences, when a country like Canada participates in these agreements, they do not lose their autonomy. So Canada is still free to create its own rules, or to choose not to implement something recommended by say, The World Customs Organization. I put up a timely example here, where the WTO has recommended that international property rights around COVID-19 vaccines be waived in the interest of sharing those vaccines globally, getting them distributed quicker. As of the time of this article, I don’t know if it’s changed since Canada had not yet implemented these WTO recommendations, whereas the US, for example, in some other countries had. I just highlight that to demonstrate that. While it’s great that Canada is part of this global standardized way of trading, it’s not complete and and nations do not lose their autonomy, and you do still need to watch out for individual differences. And then don’t forget where you’re shipping to this is a comment more on exports, not so much on imports. But as a Canadian manufacturer, say, if you’re sending your products overseas to a foreign country, you also need to pay attention to their rules and how they might have unique requirements, which are different from Canada’s some common examples I’ve seen are labels. Canada does not require a country of origin on a label, whereas many countries actually do. If you shipped that Standard label that you’ve always used, it might be missing that key piece of info and cause a problem at the other end. Similar to that would be language, your label is probably in English or French, the destination country might require a third language on your label. Different countries have different requirements for paperwork that must be submitted to clear customs at the other side. And there might even be an import permit required that you’re not aware of that product could in theory be controlled for import into that country. To get back to that example I gave earlier the Chemical Weapons Convention, you can be shipping a chemical that they view as something that can be used for nefarious purposes. And they require an import permit. So your goods aren’t getting into that countries quite so easily as you hoped. Now, the reason I mentioned all this is most of the time, your customer will be the importer in the foreign country, and you probably don’t have direct legal liability for that import process. You might you might have set up a foreign subsidiary there that is managing the import. In that case, you absolutely have to comply, of course. But if your customer is the importer of record and they take on that liability, if your business is to survive and do well, it’s in your interest to make sure they have everything they need to import property at the other end or this might be the last sale you ever have. So we’ve spoken about Canada’s rules how they’re part of a global standard, with exceptions of which we will speak to some of those exceptions. But there’s an we’ve spoken about the country are shifting to theirs Another big elephant in the room that always has to be considered as Canadians. And it’s that largest economy in the world, just south of us, which is also our largest largest trading partner. and EU, the US is, until now, just about unique, it’s not typical in the way that they apply their rules for trading outside the borders of the United States. So, Canada will typically dictate how a Canadian or a person in the borders of Canada imports or exports. But it would not control how a Canadian in England imports into England, if you will, just to give an example. Whereas the US rules are what they call extraterritorial. And they apply globally, depending on certain conditions. If you are a subsidiary of a US firm, you need to be aware of this and you need to understand it because the US rules almost certainly apply to you. But even if you’re not a US subsidiary, if you’re a publicly traded Canadian company on the Toronto Stock Exchange, depending on the nature of the transaction, you might incur some US trade control. Do you have a US origin good you’re reselling or their US origin components in the product you manufacture, for example. And I’ll just give one quick example. And why this is important because the US rules don’t always agree with the Canadian rules. The US forbids participation in the Arab League boycott of Israel. So it’s actually prohibited to comply under certain conditions with the with requests overseas, to participate in that boycott. That’s another example of something I can get into more detail later, if warranted. Canada has no such rule. You’re free to participate if you wish, but understand the nature of your business. And if you have us exposure or exposure to those us rules, because they will and they do it quite often penalize foreign companies for violating the US trade rules. That’s just one example. So we’ve spoken a bit about what rules Canadians have to live by, and where these rules come from. And and by the way, when I said until recently that the US is unique in its extraterritoriality. I’ll explain that shortly. But another area that I find global trade practitioners face a challenge in Canada, that they don’t do in many other parts of the world, particularly to the USA, is that it’s not a very transparent environment. Canada Customs global affairs, they do not share with the public the same level of information that say their US counterparts do. And it’s part of common law and culture in Canada, respecting privacy, whereas some other countries feel differently about it. They’re not, I’m not implying they’re hiding things from us. It’s just not standard practice in Canada to disclose the same level of information. This can apply to numerous factors. But I’ll give one example here. So one of the key things you do in customs operations, is you have to classify your product. And it’s according to the schedule called the Harmonized Tariff, or or it goes by many names, but tariff classification essentially. And it’s not always easy to know what the tariff classification is, I’ve seen this this mouse. So what companies will do is they will apply to Canada Customs for a ruling and say, can you tell me what the tariff classification is on this so that I can import it and be compliant? Canada Customs will do that they’ll give you your your ruling. Of course. I mentioned the World Customs Organization several times what we have here is a direct quote of the expectation at the WTO. Without reading that word for word, basically, the expectation is that WTO members will share as much as possible, the content of such rulings with the general trading public, so that I’m not the only person in Canada that now knows how to classify that knows. Everyone is now aware and it makes life easier as global traders. How does Canada compared to using the US as a direct comparable? I would say the US is possibly the best in class on this subject. They’ve built a website that is completely accessible. You just need the internet to get there. You can search all previous US Customs rulings, and it works great. It’s actually an excellent website. And when you get the results back, say a ruling you get more than just the decision X is classified as this you learn the rationale. why they chose that classification, which is very helpful for classifying slightly different products. So I now know how to classify my mouse, does that same argument apply to a cell phone. Getting into the the reason for the decision is a huge help for us as traders. What we have here is an actual example of a ruling, some clever fellow named Kevin Rudd all applied for this one. And no, I’m not sharing any secrets here. As I said, this is publicly accessible. If you have Google, you can see this. What excites me is the fact that they get into this detailed description of why they chose this classification. So that lets me if I feel I’m importing a product similar to this product, it gives me an idea of whether or not that classification would apply to this other product as well. That’s probably enough classification talk, if I haven’t put you to sleep. The moral of the story was, how does Canada compare what Canada historically, when I got into this industry didn’t share at all, it was just airtight. More recently, and I believe it was because of WC o pressure. They started disclosing rulings, but they kept them anonymous. So you would not have seen my name there. And they did not get into the rationale to the same degree, it would just be a blanket statement, that wireless Bluetooth mouse classified as XYZ. And furthermore, I want to actually show this today. But the website has changed and I can’t find it. So I don’t think that’s deliberate. Hopefully, they’re just working through some issues. But as of right now, I couldn’t even pull this up to demonstrate it. So clearly not the same level of transparency. And my point is, it’s not only for customers rulings, it’s common throughout much of global trading that we don’t learn what Canada thinks, or what Canada is doing to the same degree we do from many other countries. Another topic I can talk to on this as planned changes. So Canada announced recently that they would be addressing human rights abuses in our province in China. They have yet to clarify that or explain how this will be done. And what does this mean? How does the rubber hit the road, so to speak. And by the way, this is why I’m actually excited to tan about the the product you offer. Because if there’s a chance to get visibility into pending Canadian regulatory changes, that would be of great value. So I mentioned how it’s difficult to, to learn how they feel about things, and also to learn what might be coming. They also don’t share enforcement publicly, which if I was the one penalized, I can appreciate, I really don’t want my dirty laundry aired. But it comes with a catch. It’s more difficult as a importer in Canada to know what CBSA is focused on, what are they auditing? What are they penalizing, that would help me risk, assess and prioritize my efforts a little better. Whereas in many other countries that do share that information, it’s a little easier to to get the low hanging fruit, if you will. But I do understand if I was the one being penalized, I probably wouldn’t want to share it. Now, this is not meant to be bashing the Government of Canada by any means. As I said, I think a lot of this is just Canada’s culture and common law around secrecy and privacy, which is generally a good thing. And furthermore, it’s not entirely the government’s fault. The media, and that’s probably because of the public aren’t as interested in trade issues in Canada as they are in again, to use the US as an example where just about everything is politicized. So it’s much easier to find a news article relating to a trade issue. What you see here is actually a an article on how the US is dealing with the exact same issue I just showed you. from a Canadian perspective. The difference is I have much more insight, based on interviews with senators, interviews from members of the presidential administration, much more insight into what they’re thinking and where this is all going. Then I do north of the border. And I do think that’s part of the public’s lack of appetite for International Trade in Canada. We’ve had some supply chain issues that have affected people more than normal and I find lately people are asking more questions about international trade, but until it kind of hits your kitchen table as they say, it’s just not a hot topic here. So getting back to how, how different are we from the global standards or from what other countries do? I don’t want to imply there’s huge differences. There really isn’t. But I’ll talk to a few. And even a small change can be difficult to manage and come with serious repercussions. The big example in Canada because the US is our largest trading partner is the Cuba sanctions, the US forbids trade with Cuba, Canada does not. So what do you do considering the US extraterritorial application I discussed earlier? One option would be just choose not to deal with Cuba and then you don’t take on that risk. It’s not necessarily so simple, because Canada has actually passed what they call a blocking statute, which is intended to prevent Canadian companies from complying with this US embargo of Cuba under certain conditions. And I won’t get into too much detail on that. I only really raise it to, to highlight the point that sometimes you can have competing interest, one country says do or don’t do this, and Canada’s saying the opposite. I’d like to speak to this in there’s an old stereotype. Of course, we’re so polite as Canadians, I don’t know if it’s true or not. But I will say in my experience, Canada, customs officers especially and I’ve also talked to some in global trade as well, tend to be more, I don’t want to I don’t know if polite is the word more sociable. Maybe that’s the best way to put it without offending any foreign officials, often dealing with a customs agent from another country, I find they’re very abrupt to the point. And there’s no idle chatter, whereas many Canadian officers I’ve spoken to be there is an actual noticeable difference. They’ll ask how you’re doing, for example. So I just like to throw that one in there, semi humorously. But there’s actually a difference in the way the administration officials behave, in my opinion, to more serious matters. Here’s an example of a way that Canada Customs feels significantly different than the US and several other countries. I know I keep using the US as my example. So I threw an EU one in there as well. But to put this, simply, Canada disagrees with several other countries on how to handle the Declared Value of a sale that involves multiple parties. So imagine a Chinese manufacturer sells to middlemen and Dubai who resells to Canadian customer, who then maybe resells to another Canadian customer before the goods even enter the country. Which of those values is the value for customs purposes that will decide the duty decide the GST? Canada disagrees with several other countries, I think Japan is one on how to manage that. And it can make it difficult as a multinational to know how to set your policies how to set your standards I mentioned or I didn’t mention, sorry, the introduction mentioned them involved in the SAP ecosphere. How do you set up your SAP intercompany pricing schemes, if two countries don’t agree on how that should look. And to get back to the US extraterritoriality, they are no longer alone. China has been entering this this realm, which is going to make life this is my personal prediction. This is going to be one of the single greatest challenges for multinationals to navigate. In the coming years. China is expanding its influence outside the borders to the point where it is now in my opinion, the second most significant extraterritorial application of their own laws on the planet. A key one is their anti sanctions law. Kind of like Canada’s blocking law, but but different. Where they will sanction a company for complying with a US sanction that they don’t agree with. So imagine as a Canadian company, you refuse to do business with a Chinese entity because the US Department of Treasury sanctions or maybe the UN Security Council sanctions. China says, I demand that you resume business with us, or we will sanction you. You’re now faced with the possibility of losing all access to the Chinese market. losing access to the US market is is devastating. What do you do? I’m not aware of significant examples of this happening yet. This is new, this is developing, but the rule is in place to enable it and this is something to watch going for Another area of extraterritoriality coming out of China is their export controls. Similar to the US, China is now controlling the RE export of a Chinese made good after it leaves the country. So imagine you you’ve, let’s get back to the most ideal, I don’t know where it’s made. But imagine that’s made in China. And it comes to Canada. And let’s say it’s, it’s controlled for export for national security reasons, because it’s got like, it’s got a laser on it or something. So China controls it for export to Canada, they issue a export license to Canada compliantly, no rules were broken. Now, as a Canadian, I want to re export it somewhere, I have to go back to China, to get an export license from that country, just so that I can reship it out of Canada, similar to the US requirements. And again, this is brand new, it’s developing, we can’t say for sure how significant this will become. But I personally believe it’s something Canadians will be struggling with in the years to come. So that’s the last time I formal slides, I honestly didn’t look at the time. So I’m hoping I did okay on time here. But just to summarize, the good news is thankfully, most of our international trade rules are harmonized thanks to participation in these global entities. But that doesn’t mean you don’t have to be concerned with the differences. Pay attention to your destination country, if you’re an exporter, always consider if US law applies. Always consider it as significant as the Canadian rules, in my opinion. And as Canadian traders, we just have to work a little harder to to learn what our customers administration deems important or what regulatory changes might be coming. Because there’s just not the same level of transparency. And to get back to the extraterritorial discussion, there may come a time, as painful as it will be, well, you’ll have to decide who are you more afraid of? Because between Canada, the US and China and potentially other countries, there may be such a significant disagreement on the rules, that you’re going to have to violate one of those countries rules. Don’t make it Canada, I’m never advocating for violating Canadian rules. But if you’re stuck between those extra authoritarian arguments, I just don’t know what the easy answer is. Hopefully you never get there. Hopefully, I never have to deal with that. And with that, I will hand it back to any questions or comments.
Tan Sukhera 27:49
Excellent. Well, thank you so much for that, Kevin. There you have it, folks, international trade compliance, a Canadian perspective, how Canadian multinational companies manage Canada’s rules versus global rules and expectations. Now it’s time for the last five minutes of the call where we do our q&a. Let’s take a look at some of the questions that have been coming in. Starting with question number one says How would you how would I know if I’m a subject to the US rules as well as candidates? Sorry, that that was How would I know if I’m subject to the US rules? Yeah, as well as Canada.
Kevin Riddell 28:27
As I mentioned, if you’re a subsidiary of a US firm, so let’s say you’re the Canadian entity owned by a US company, it applies, it completely applies. That said, given if you’re not if you’re a wholly owned Canadian company, it’s a little more complicated than that it will depend on things such as, do you resell US products? Do you have us content in the product you manufacture? Do you trade in US currency? Do you invoice in US currency? So unfortunately, it’s not a simple answer. But I would argue that it’s worth getting outside counsel or assistance if you’re just not sure, it’s something you need to know.
Tan Sukhera 29:09
The next question is, do you see global rules becoming more or less synchronized?
Kevin Riddell 29:17
Until a few years ago, I would have said, more synchronized that was definitely the progression in the let’s say, post cold war era. With a couple key political developments that I won’t name in the last five years, things started to change and I think it’s it’s becoming more fractured. I hope it will reverse course and resume becoming a little more standardized globally, just because it makes people like myself. It makes our lives easier. Okay,
Tan Sukhera 29:48
and then the next question is, how can we know if our products require permits or export licenses?
Kevin Riddell 29:58
I would say if you don’t know already and you’re actively exporting get help. That’s something you should know before your goods cross the border. But I’m not trying to blow it out of proportion. If you can risk manage a bit, what is your product line? Do you sell? Paper Towel? You’re probably safe. Do you sell chemicals or high end machinery? It would be worth getting a third party to answer that for you. You can go to the government for similar to the tariff classification rulings I mentioned, you can go to the government for a ruling on that as well. I would recommend starting with third party personally
Tan Sukhera 30:35
100%. Well, thank you so much for that, Kevin. If there’s no other questions, we can say good afternoon to everybody that that’s joined us today. Thank you so much for your time, Kevin. It was super insightful. I love the slideshow as well. Just quickly before we let you go, if people want to get in touch with you, what’s the best way for them to do so?
Kevin Riddell 30:55
Probably the easiest way is LinkedIn. If you search my name on LinkedIn, you should be able to find hopefully fairly easily.
Tan Sukhera 31:05
Excellent. Thank you so much, everybody. Thank you, Kevin. Take care everyone.
Kevin Riddell 31:08
Thank you. Bye