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29 August 2008
In June 2008 significant developments were announced in connection with Canada’s cargo security programme, Partners in Protection (PIP). Current participants, including importers and carriers, as well as prospective participants should take note of these developments and the opportunities and implications that they entail.
For several months the Canada Border Services Agency has been working towards two significant milestones with respect to Canada’s PIP programme: (i) a complete overhaul of the programme affecting both current and prospective participants; and (ii) a mutual recognition agreement with the US Customs Border Protection rgearding the United State’s own cargo security programme.
The PIP programme is a cooperative effort between the Canadian government and private industry to ensure cargo security from supplier to customer. The PIP programme is intended to help protect the border against potential threats to Canada’s health, security and economy.
The PIP programme is the Canadian equivalent of the US Customs-Trade Partnership against Terrorism. The benefits of the PIP programme to the participant include the more efficient customs processing of shipments, reputational benefits and a reduction in the likelihood that the organization will be used to smuggle contraband. Furthermore, PIP programme participants may be eligible to participate in the Free and Secure Trade programme, which is available only to PIP programme participants in Canada.
To participate in the PIP programme, organizations must sign a memorandum of understanding with the Canada Border Services Agency. In connection with this agreement, organizations must self-assess the security of their supply chain. To do this, companies must submit a completed security profile to the Canada Border Services Agency. The security profile requires the applicant to provide information regarding:
In the past the Canada Border Services Agency would then review the self-assessment and provide suggestions and guidance on how the company should address potential gaps in security. In accordance with these recommendations, the organization and the Canada Border Services Agency would then develop a joint plan of action. Thereafter, the organization would be expected to participate in awareness sessions and consult with the Canada Border Services Agency on a regular basis.
On June 28 2008 the Canada Border Services Agency and the US Customs Border Protection signed an arrangement that recognizes the compatibility of the countries’ respective cargo security programmes - Canada’s PIP programme and the US Customs-Trade Partnership against Terrorism. The arrangement recognizes that both countries apply similar security standards and perform similar site validations when approving companies for membership in their respective cargo security programmes.
Both countries now use similar criteria when granting companies membership to their respective cross-border programmes. A ceremony was held in Brussels attended by Alain Jolicoeur, then president of the Canada Border Services Agency, and US Customs Border Protection Commissioner W Ralph Basham.
The mutual recognition agreement is intended to streamline the flow of commerce and contribute to the development of an international standard for cargo security. The mutual recognition agreement was concluded after extensive collaboration between the Canada Border Services Agency and the US Customs Border Protection, and after detailed comparisons of each country’s cargo security programmes. Both principles and practices were undertaken.
The mutual recognition agreement should be a welcome development for companies that are involved in Canada-US trade and wish to participate in both the PIP programme and the US Customs-Trade Partnership against Terrorism. Although separate applications must be submitted for each programme, the application and approval process should be significantly streamlined under the mutual recognition agreement. Members of both programmes can continue to benefit from membership to the Free and Secure Trade programme, which will enable them to use the Free and Secure Trade border-crossing lane when travelling between Canada and the United States.
On June 30 2008 the Canada Border Services Agency unveiled the new PIP programme. The new programme introduces different categories of participation and new mandatory minimum standards, and aims to be more compatible with its US equivalent.
The Canada Border Services Agency has been consulting extensively with stakeholder organizations for several months and continues to do so in connection with all aspects of the new PIP programme. These consultations have included such issues as:
Applicants will fit into one of two categories within the modernized PIP programme: members or associates. Members receive the benefits of full participation in the PIP programme, which include the ability to register for the Free and Secure Trade programme, as well as the receipt of programme information and updates and consultation in respect of future changes to the programme. To be eligible for PIP programme membership, companies must meet certain defined criteria. The applicant must be:
The applicant must also own or operate facilities in Canada that are directly involved in the import or export of goods from the United States. Alternatively, the applicant may be a US company applying for Free and Secure Trade programme (Canada) membership. Finally, the applicant must be in 'good standing'.
Companies that are ineligible for PIP programme membership may still participate in the programme by applying for associate status. Associates receive programme information and updates and are consulted on changes to the programme, but they do not receive membership benefits. Among the categories of people that may be regarded as associates are:
Mandatory security standards
In an October 2006 study the Canada Border Services Agency’s Evaluation Division concluded that the PIP programme’s effectiveness was inhibited by the lack of mandatory participant requirements. In response to key recommendations in the Evaluation Division’s report, standards will no longer be ‘recommendations’ under the modernized programme; instead, they will be prerequisites to registration. In the past, when participants were approached with recommendations by the Canada Border Services Agency, they had a choice of whether to follow the recommendation. Particularly in situations where implementing the recommendation would be expensive, PIP programme members could simply choose not to. Under the new programme, PIP programme partners will be required to adhere to stricter, more defined and targeted security measures to enhance the security of supply chains further.
At a minimum, PIP programme members must have in place physical barriers or deterrents that guard against unauthorized access to cargo handling and storage facilities. All external doors, gates, windows and fences must be secured with locking devices, a criterion which could be somewhat problematic in situations where the member is not the owner of the property. Members must also have in place an employee identification system to control access to their facilities. Visitors, regardless of whether they are known to employees of the member, must:
Standards are also established for, among other things, lighting, parking controls, signage, deliveries and document security.
There will be consequences for failure to abide by the mandatory standards, including removal from the programme.
Cargo sealing guidelines
The Canada Border Services Agency is consulting with stakeholders concerning the new requirements for the sealing of cargo containers. The initial proposal contemplates that PIP programme members will be required to affix high-quality mechanical seals to their containers and trailers prior to shipping ,which must remain continuously affixed while the goods are in transit. In particular, it is proposed that seals meeting or exceeding the current International Organization for Standardization Publicly Available Specification 17712 Standard for Freight Containers - Mechanical Seals will be required for PIP programme purposes. The Canada Border Services Agency intends to verify the integrity of the seals upon presentation at the Canadian border.
Canada Border Services Agency security review and assessment
Another new addition to the PIP programme is that the Canada Border Services Agency will be introducing site visits as part of the approval process. These will be performed in an effort to confirm the information provided in the applicant’s security profile, as well as to review the participant’s security measures and procedures and to identify any vulnerabilities in its premises, processes and procedures.
Where the applicant has been validated under the US Customs-Trade Partnership against Terrorism programme within the last two years, the Canada Border Services Agency may opt to forgo a site visit.
Current participants must reapply
As a result of revised membership criteria, all PIP programme members that joined prior to June 30 2008 are required to reapply in order to continue their participation in the programme. The deadline for reapplication is December 31 2008. Participants will need to renew their PIP programme membership every three years, at which time participants must provide an updated security profile and submit to a site visit by the Canada Border Services Agency. The Canada Border Services Agency has indicated that it will process applications on a ‘first in’ basis, and that current members which apply before the deadline will have their privileges (eg, membership to the Free and Secure Trade programme) extended until the Canada Border Services Agency is in a position to make a final determination about their membership.
Eligibility for Free and Secure Trade Programme to be Broadened
One of the major benefits of participation in the PIP programme is considered to be potential participation in the Free and Secure Trade programme. In particular, a participant in this programme may use a designated lane (where available) at border crossings to expedite customs clearance and entry of goods into Canada. One of the criticisms raised with the programme is that it is available only to companies that are participants of both the PIP programme and the Customs Self-Assessment programme. A further complicating factor is that non-resident importers are ineligible to apply for participation in the Customs Self-Assessment programme. However, it appears that this may be changing. Recently, the Canada Border Services Agency indicated an intention to recommend a review of the Free and Secure Trade programme requirements to enter Canada and, in particular, to permit PIP programme-only members to be eligible for the Free and Secure Trade programme.
While participation in the PIP programme remains voluntary, an increasing number of companies involved in international trade are considering the benefits of participation. In this connection, stakeholders have urged the Canada Border Services Agency to enhance the benefits available to participants and to make these more transparent and tangible.
From a drafting perspective, more and more companies involved in cross-border trade are inserting clauses into their agreements with suppliers and carriers insisting that their supply chain partners are members and fully participate in voluntary cargo security programmes and related programmes such as the Free and Secure Trade programme. Therefore, companies that are not yet members of the PIP programme should take a closer look at it and re-evaluate the benefits of participation.
For further information on this topic please contact Greg Kanargelidis at Blake Cassels & Graydon LLP's Toronto's office by telephone (+1 416 863 24 00) or by fax (+1 416 863 2653) or by email (firstname.lastname@example.org). Alternatively, contact Elysia Van Zeyl at Blake Cassels & Graydon LLP's Ottawa office by telephone (+1 613 788 2200) or by fax (+1 613 788 2247) or by email (email@example.com).
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Elysia Van Zeyl