Vaughan Rising Blog: Canada-U.S. Border Restrictions – Practical Q and A with BDO
The Canada-U.S. border has been closed to non-essential traffic since March 21. As intended, the restrictions have resulted in a drastic reduction in movement across the border to lessen the spread of COVID-19.
According to data obtained by Postmedia, between June 15 and June 21 just 170,998 people entered Canada at a land crossing with the U.S. — and of that number, 104,247 were truck drivers. Over the same period in 2019, more than 1.2-million people travelled through a land crossing from the U.S. into Canada – more than seven times the figure from this year.
What does this mean for cross-border business?
To find out, the City of Vaughan consulted two experts on Canada-U.S. border protocols:
- Charmaine Goddeeris, Senior Manager in the Customs and International Trade Practice, BDO Markham – Her more than 20 years of professional experience providing customs and international trade consulting services for clients in a wide range of industries has earned Charmaine the position of trusted advisor to importers and exporters in a multitude of trade matters, including customs process reviews, valuation, tariff classification, rules of origin, marking, drawbacks and refunds and free trade agreements.
- Doreen Buksner, Senior Manager, Immigration Services, BDO Toronto – As a Regulated Canadian Immigration Consultant and Senior Immigration Manager, Doreen has worked in corporate immigration for eight years with a large international immigration firm. She brings a wealth of knowledge and experience with respect to temporary Canadian immigration matters, having focused her practice on visitor visas, work and study permits and inadmissibility issues to assist businesses in fulfilling their relocation needs.
What are the current restrictions regarding business travel and goods movement? What has changed since the pandemic started?
Doreen Buksner: There have been five areas of change for business travel:
- Essentialness test: Customs officers are granted a great deal of discretion to determine if travel is essential. There has been a wide range of interpretations and inconsistent application of the “essentialness test” at various ports of entry.
- Quarantine protocols: Most travellers are required to quarantine upon entry to Canada. Employers are expected to pay for expenses and salaries during isolation. Immigration conducts compliance checks within days of arrival to ensure adherence to the quarantine plan presented by the traveller on entry. Non-compliance can result in significant fines to both the employee and employer, depending on the individual facts.
- Foreign national exemption: Foreign nationals who hold a work permit are exempt from the travel restrictions; however, they must also prove that they have ongoing employment in Canada. Merely holding a work or study permit is not sufficient.
- Port of entry applications restricted: Foreign nationals who are generally able to apply for a work permit at the port of entry must now apply in advance at a visa post abroad. They will not be permitted aboard a flight without approval from the visa office.
- Appointment to get a permit: Some ports of entry are taking appointments to ensure a reduced number of applicants in the office at any given time.
Charmaine Goddeeris: In regard to the movement of goods in Canada, there has been very little change since the onset of the COVID-19 pandemic. All of the requirements that were previously in place (i.e., licensing and permits) are still applicable but have not been tightened. The critical thing to remember is that any time you are importing goods into Canada, you must do your due diligence before importing or you could face delays at the time of import or even denial of entry of the goods. All importers, especially of food and children’s items, must take care to obtain the correct licences and permits.
What kinds of business travel are essential vs. non-essential?
Doreen Buksner: Actual work at client or company sites is permitted, irrespective of industry or profession. Workers in food production, agriculture and transportation are considered essential and receive priority processing. Business meetings are typically considered non-essential as they can be conducted virtually.
Some companies are required to send their Canadian staff to the U.S. to manage projects (e.g. I.T. or construction related). Are they allowed? If not, what are some alternative solutions?
Doreen Buksner: It depends on which visa category they are being sent under. U.S. President Donald Trump announced a proclamation in late June restricting visa applications under L1 (intra-company transfer), H1B/H2B (specialty occupation and non-agriculture workers), and J1 (interns, caregivers). Canadian citizens are exempt from the proclamation and may be eligible for other visa categories, including E (treaty and trade) and TN (professionals under the Canada-United States-Mexico Agreement, or CUSMA). Citizens of other countries currently residing in Canada, including Canadian permanent residents, tend to be more restricted in their U.S. visa options.
If workers are deemed essential (from Canada to the U.S.), is quarantine required upon returning to Canada? What is the protocol?
Doreen Buksner: Workers in essential businesses or jobs are exempt from the quarantine period on their return to Canada. They are strongly encouraged to abide by all other protocols, including limited daily travel, wearing PPE, maintaining physical distancing and self-monitoring.
Are there certain sectors where there has been a drastic swing in trade, either positively or negatively?
Charmaine Goddeeris: All sectors of the economy have seen a significant decline in trade since the onset of COVID-19, from manufacturing to retail and consumer goods, and this appears to be the trend until mid-2021.
Many manufacturers that I advise closed temporarily in mid-March, and workers were instructed to stay home. If no manufacturing was happening, then there was no need for the importation of manufacturing inputs. This was most evident in the automotive industry, a staple of the Canadian economy. This part of the economy is rebounding now in the Canadian market as workers are back on the job, and the economy begins to ramp back up.
What trends are you seeing in supply chain pivots? (e.g. more diversified sourcing, etc.)
Charmaine Goddeeris: We are seeing two trends, and they’re both evolving. One is purchasing products closer to home (“Buy Canadian”). The other is finding creative yet legal ways to enter the U.S. market with the lowest possible duty costs. We are seeing that foreign companies are choosing to set up manufacturing facilities in Canada as a way to sell their product into the North American market by using the benefits of the newly enacted CUSMA.
What percentage of businesses would you estimate have a contingency plan in place?
Charmaine Goddeeris: Unfortunately, this number continues to be very low. The global trade landscape is more volatile now, and punitive duties can be put in place in as little as 30 days, as we have seen and continue to see. Companies need to either ensure their bottom line can weather any increases in duties or have backup suppliers waiting in the wings.
Has there been a price change for the logistics/distribution cost due to the restrictions? If there was a spike in the beginning, is there an indication that it’s coming down?
Charmaine Goddeeris: I have seen a spike in the cost of moving goods by air. A large amount of airfreight is transported in the bellies of passenger airplanes. With the decline of available flights, importers are experiencing difficulty in finding planes to move their goods. When they can, the prices are much higher than in the pre-COVID-19 world. I do not expect this upward trend in airfreight costs to change any time soon.
Are you seeing any other major issues?
Doreen Buksner: Canada relies heavily on immigrants and foreign workers to contribute (new) skills and innovation and to fill labour shortages. The government has responded quickly to address immigration issues and ensure that Canadian businesses can survive, and even thrive, during and after the pandemic. By contrast, the current restrictive approach in the U.S. is pushing many companies to house their specialized workers in Canada as an interim measure. Canadian companies are also taking the opportunity to source talented foreign workers who have been denied U.S. visas.
Charmaine Goddeeris: The major issue has been and continues to be uncertainty. There’s the uncertainty of when we will return to a new, or at least next, normal. There’s the uncertainty of new or escalating trade disputes between powerhouse countries. It has always been my advice that companies have plans in place for worst-case scenarios so that they are prepared for hiccups in supply chains or increased duty charges and are able to pivot quickly.
Any recommendations or tips for businesses to plan their distribution in the U.S.?
Charmaine Goddeeris: Companies need to fully understand the global landscape as a whole and how their business can grow within that landscape.
My advice is to start by reviewing the obvious and often overlooked things, like the information which will be reported to customs regarding your imports. An error in key pieces of information could lead to an overpayment of duty and additional costs. Remember, if you are competing with U.S. companies that manufacture or purchase goods in the U.S., they will not have duty costs and will likely be able to sell products at a lower cost which can make you, the importing distributor, not as competitive.
If you are selling to the entire North American market, consider using Canada as the distribution hub, and not the U.S. That way you only pay duties on the goods destined for the U.S. market and not all goods.
When will the restrictions be lifted?
Doreen Buksner: I do not foresee the restrictions being lifted in 2020. I predict they will reopen in spring 2021, assuming the U.S. can contain its current cases of COVID-19 and avoid a second wave in the fall or winter.
The outcome of the U.S. presidential election will also be a determining factor of how quickly the borders will be able to reopen.
The information in this article is current as of September 8, 2020.
For more information about how the Canada-U.S. border restrictions affect your business, please contact the City of Vaughan’s Economic and Cultural Development team.
The contributors can be reached via the coordinates below:
Senior Manger – Customs and International Trade Services
Senior Manager, Immigration Services
The information presented in this article is provided solely for the purpose of bringing ideas to the attention of the business community, as a service to the businesses of the City of Vaughan.
The City of Vaughan does not, whether directly or indirectly, endorse, sponsor or sanction the opinions expressed in this article, nor any services or products that may be offered by the contributor/s in their normal course of business. The City of Vaughan does not intend by this article to recommend the contributor/s nor to promote them as subject matter experts over any other business persons employed or engaged in similar lines of business.