Navigating the waters of CBSA carrier codes

Harper Grey LLP’s Jonathan Meadows and Natalie Parsonage recently prepared this guest editorial regarding the Canada Border Services Agency’s evolving approach to carrier codes, as well as a brief snapshot of the Shipping Federation of Canada’s response to the CBSA’s impending July 2014 amendments. 

In 2006, the northernmost Canadian settlement of Grise Fiord on Ellesmere Island received an unanticipated guest. A Romanian man had tried to sneak into Canada by captaining a small motorboat from Greenland on an eight-day, 1000 kilometre journey through the treacherous ice-filled waters of Baffin Bay. Florin Fodor, 32, was apprehended by the RCMP and charged with entering Canada, having already been deported six years earlier. Additionally, Mr. Fodor was also charged by the Canada Border Services Agency (CBSA) for failing to report to officials upon arrival at Canadian shores.

And it is not just Mr. Fodor attempting to make his way here. People around the world are invested in transporting their goods and services to and across Canada. Whether it is the cheeky attempts of an ambitious European, or the commercial interests of those involved in the international shipping trade, the CBSA is charged with knowing what crosses our borders.

Imports are essential to Canada’s economic prosperity. According to the World Bank, the total value of Canadian imports increased from 34% to 45% of Canada’s gross domestic product between 2008 and 2011. Our largest partner is the U.S. with whom we share the world’s most lucrative and most enduring trade relationship, moving more than $680 billion in goods and services across the U.S./Canadian border each year.

With such a considerable volume of trade making its way across our border, the struggle for the CBSA is in creating a consistent and reliable system of determining who is importing what, where, how, and why. In particular, the CBSA seeks to adapt to the technical and security demands of both the World Customs Organization, and the U.S. Custom and Border Protection.

Currently, the CBSA is implementing an “Advance Commercial Information” (ACI) system which, when fully implemented, will require carriers, freight forwarders and importers in all modes of transportation (air, marine, highway and rail) to electronically transmit ACI to the CBSA within prescribed time frames. The CBSA changes to both legislation and regulations are outlined in the Regulations Amending Certain Regulations Made Under the Customs Act proposal. Regarding maritime shipping, the third phase of ACI, called “eManifest”, will introduce new requirements, and penalties, as of July 2014.

CARRIERS

A carrier is a person involved in international commercial transportation and who operates a conveyance used to transport specified goods to or from Canada. To operate a conveyance means to have legal custody and control of the conveyance as a) an owner, b) a lessee under a lease or agreement of hire, c) a charterer under an agreement of hire, d) a purchaser under a conditional sale or hire purchase agreement that reserves to the vendor the title to the conveyance until the purchase price is paid or certain conditions are performed, or e) a mortgagor.

Specified goods means a) commercial goods, b) empty cargo containers to be imported into Canada and that are not for sale, and c) any other goods to be transported to Canada for a fee.

In order for a carrier to transact business with the CBSA, carriers must have a carrier code, a unique four-character code assigned by the CBSA to identify that carrier. Only one carrier code is issued to each legal entity (corporation, partnership or sole proprietorship) per mode of transport (highway, marine, air or rail).

CARRIER CODES

As of March 2009, the CBSA no longer accepts cargo or conveyance reports with the 9ITN carrier code from marine carriers. To report and transmit the necessary cargo information to the CBSA, a marine carrier must use a 9000 series code issued by the CBSA under section 12.1 of the Customs Act. Only one code is needed regardless of the number of vessels in the company’s fleet.

In order to apply to the CBSA for a carrier code, a marine carrier must select between a bonded or non-bonded code. The CBSA “strongly recommends that marine carriers apply for a bonded carrier code, as a bond is required anytime unreleased goods move beyond the first port of arrival (FPOA). This includes scenarios such as emergency stops when the FPOA is changed.” Otherwise, a non-bonded marine carrier must have all shipments released at the FPOA. Additionally, single trip authorizations are available should, for example, a non-bonded carrier fail to obtain release of the shipment at the FPOA and instead choose to bring the shipment inland for release at a different CBSA office. Such authorization requires the carrier to either post security with the CBSA, or engage a customs broker to provide such a service.

A bonded marine carrier avoids the gamble of unexpected detours, but must post security with the CBSA to the tune of $25,000. The bonded carrier is then permitted to move their goods past the FPOA and between other points in Canada. Only one bond per carrier is required.

More information on carrier codes can be found on the CBSA website under “Import and Export” as well as in the “Memorandum D3-1-1” and “D1-7-1”.

ADVANCE COMMERCIAL INFORMATION

Since 2004, all marine carriers are required to transmit their cargo and conveyance data to the CBSA. Such ACI is part of the eManifest initiative and applies to all vessels carrying commercial goods loaded in a country other than Canada and intended for one of our ports. The ACI transmission timeframes vary depending on the type, but more importantly, the origin of the goods. For example, if cargo is loaded in the United States or Puerto Rico, the ACI data must be transmitted to the CBSA at least 24 hours prior to the vessel’s arrival at the first Canadian port. This time frame is not affected by the type of cargo arriving from America or its territories. Elsewhere, conveyance reports must be transmitted at least 96 hours prior to arrival at the FPOA for all containerized and non-exempted break-bulk vessels.

Through the ACI program, the CBSA is able to wield an enormous amount of control. For example, if a cargo report must be transmitted prior to loading, the Estimated Date/Time of Loading (EDTL) must be indicated on the cargo report. The transmission time must be at least 24 hours prior to the EDTL. The CBSA then has that period to review the cargo reports. If the carrier receives a “Do not load” message, even in a foreign country, the goods do not have authorization to be loaded on the vessel. The carrier must retransmit the cargo report with the required information and may not load the cargo until they have received an electronic message from the CBSA indicating that the “Do not load” has been removed by the Agency. At any point while a vessel is traveling to Canada, a “Hold” message may be issued. This means that when the vessel arrives in Canada the cargo cannot be removed from the dock until the carrier receives an electronic message indicating that the “Hold” has been removed.

More information on how to apply to participate with the ACI system can be found in form BSF691 on the CBSA website.

EMANIFEST & WHAT’S HAPPENING NOW

The purpose of eManifest is to create a virtually paperless process that starts before shipments reach the border. The collection and risk assessment of ACI, sent electronically to the CBSA, will allow low-risk shipments to be identified prior to arrival and processed in a more efficient manner, in line with World Customs Organization and U.S. Customs and Border Protection expectations.

To this end, the Customs Act, the Reporting of Imported Go
ods Regulations and the Transportation of Goods Regulations, establish the time of report, manner of report and who reports goods entering or moving in-transit through Canada. Section 12.1 of the Customs Act provides the Governor in Council with the authority to make regulations regarding ACI in all modes of transportation. Section 109.1 of the Act authorizes the CBSA to issue penalties for noncompliance with requirements outlined in the related regulations. In the commercial stream, such “Administrative Monetary Penalty System” (AMPS) penalties have been issued by the CBSA since October 7, 2002, for non-compliance with program requirements.

However, AMPS penalties are currently not assessed against marine carriers regarding existing ACI requirements. When eManifest is fully implemented in July 2014, the Designated Provisions (Customs) Regulations will be amended to designate new subsections 12.1(2) and (7) of the Customs Act and new sections of the Reporting of Imported Goods Regulations. Together with existing provisions, this will allow the CBSA to assess AMPS penalties against marine carriers for non-compliance in the following situations: a) failing to provide pre-arrival cargo and conveyance information; b) failing to provide cargo and conveyance information electronically or within the prescribed time frames; c) failing to notify the CBSA without delay of a change to the ACI provided; d) failing to comply with a notification issued by the CBSA regarding commercial goods destined for Canada; and e) failing to hold a valid carrier code.

In presenting these proposed amendments, the CBSA granted internal and external stakeholders 30 days in which to submit comments or pose questions regarding the impending changes.

IMPACT OF THE PROPOSED REGULATIONS ON CARRIER CODES

In response to the CBSA’s proposal, on March 17th, 2014 the Shipping Federation of Canada posted an open letter. The Federation was incorporated by an Act of Parliament in 1903, and represents and promotes the interests of ship owners, operators and agents involved in Canada’s world trade. In its letter, the Federation criticized elements of the CBSA’s Regulations Amending Certain Regulations Made Under the Customs Act. Of particular note, it states, the provisions regarding the status, issuance and use of carrier codes “speak far more in generalities than it does in specifics”. In light of the severe consequences of failing to receive a carrier code, the Federation argues, the CBSA’s approach is unacceptably vague.

For ten years the CBSA has been incorporating new ACI measures into its carrier code policy. Throughout this process, the Federation argues that the CBSA has not been able to provide a definitive definition of a carrier for carrier code eligibility purposes. The Federation’s hope had been that these impending amendments would clarify the matter but in fact, the Federation argues, the most recent changes regarding carrier codes have worsened the situation.

The definition of who is eligible for a carrier code continues to be those who have legal custody and control of the conveyance, described in greater detail above. The Federation argues that this does not reflect the complexity of the owning and operating relationships that can exist in the marine mode. For example, many ocean carriers engage in vessel sharing agreements with their competitors. The Federation fears that while in the past each carrier on a shared ship was able to submit their ACI with their own carrier code, now it appears that only the code issued to the carrier who owns and operates the ship will be eligible to submit the necessary data.

The December 2013 amendments to section 266 of the Jobs and Growth Act introduced amendments to section 12.1 of the Customs Act. The effect was to turn the carrier code from an administrative tool into a legal requirement, without which a carrier cannot fulfill another legal requirement, namely the duty to report. The Federation lists two key provisions in this respect: section 12.1(1) of the Act, which requires “the owner or person in charge of a conveyance . . . to give the Agency prescribed information about the conveyance and the persons and goods on board,” and section 12.1(2), which stipulates that “a person who is prescribed to provide information under subsection (1) shall hold a valid carrier code.” It argues that this codification of the carrier code requirements, in combination with the most severe available sanction, i.e. the suspension or cancellation of the carrier code under section 12.1(5), will “amount to the removal of the carrier’s ability to trade in Canada.”

One would argue that the removal of such a right is one of the reasonable purposes of the eManifest and is necessary to enable the CBSA to protect our borders and ensure that those who cross them only do so having met explicit standards. The Federation agrees. However, it argues that in the proposed amendments, the Minister is authorized to suspend the carrier code if the carrier provides “false or misleading” information in their code application form under the proposed section 12.1 of the Customs Act. This power, combined with the ambiguity of the now codified carrier requirements, grants the Minister disproportionate leeway to decide who meets the standards, and could potentially impact carriers with at best, avoidable inconvenience, and at worst, the unfair denial of their ability to import to Canada.