Change in Senior Ranks of the CBSA

Effective March 3, 2008, Stephen Rigby, currently Executive Vice-President of the Canada Border Services Agency, becomes Associate Deputy Minister of Foreign Affairs. His place will be taken by Greta Bossenmaier who is currently Vice-President of the Innovation, Science and Technology Branch at the CBSA.

Tracking Value-Added Trade: Examining Global Inputs to Exports

(Statistics Canada)

Canadian industries have sharply lowered their use of imported inputs to produce exports, according to a new study published today in Canadian Economic Observer.

The lower use of imported inputs sheds light on several widely discussed trends. It contradicts fears of a widespread offshoring of domestic production as firms adopt global supply chains.
It also suggests that firms in Canada have ample room to import more inputs as the soaring loonie increases competitive pressures, something they began to do in 2004.

Finally, removing the import content from exports reveals Canada's true exposure to export demand. This is an important piece of knowledge as analysts debate whether other countries can "decouple" from the current slowdown in the US economy. Since 2000, changes in exports have had less of an influence on the course of gross domestic product (GDP).

Comparing gross exports to GDP has always resulted in misleading analysis. Exports are the equivalent of gross sales, while GDP is measured on a value-added basis. Removing the import content of exports puts them on the same value-added basis, revealing the true exposure of GDP to external demand.

This paper shows that 27.9% of GDP came from value-added exports in 2004. This was down from its peak of 31.4% in 2000, and close to its recent low in 1997. It is well below the often-quoted but misleading share of gross exports in GDP, which peaked at 46% in 2000 before settling at about 38% in 2003 and 2004.

With exports to the United States currently accounting for 75% of all Canada's exports, this implies that just over 20% of Canada's output is exposed to the risk from the slowdown in US growth. The share of jobs exposed to exports would be even lower, as exports remain a sector with above-average output-per-worker. Complete press release and links here.

China Passes Canada, Becomes Top U.S. Import Source

(Bloomberg – Mark Drajem)

China passed Canada to become the largest source of products shipped into the U.S. last year, capping a six-year period when its exports to the U.S. more than tripled.

Led by items such as flat-panel televisions and computers, household appliances, toys and clothing, imports from China surged to $321.5 billion in 2007, according to a Commerce Department statement today. Chinese trade is accelerating faster than imports from Mexico after the North American Free Trade Agreement took effect in 1994.

China's ascension may lead to a backlash in Congress, where lawmakers accuse China of undervaluing its currency, producing unsafe products and providing its industries with subsidies that allow them to undercut American-made goods.
“This is a surprise, and it will be a bit of a ding-dong for the Congress,'' said Gary Hufbauer, an economist at the Peterson Institute for International Economics in Washington.
Lawmakers are considering a variety of measures to encourage higher duties on Chinese imports to compensate for what they say is an undervalued Chinese currency. The record trade deficit announced today bolsters their efforts, they said. “There is a more compelling case for our legislation than ever, given these new figures,'' said California Republican Representative Duncan Hunter, co-sponsor of a measure to allow companies to petition for duties on Chinese goods.

Yet, the burgeoning Chinese imports have benefited the U.S. by lowering prices and expanding choice, advocates say. “Consumers are getting lower prices for a wider variety of goods,” said former U.S. Trade Representative Rob Portman.

A stronger Chinese currency would mean higher prices for Chinese goods in U.S. markets and could impede consumer spending – which makes up more than two-thirds of the U.S. economy – just as the U.S. tries to avoid a recession. A more expensive yuan is “not a good thing for the U.S. – it is only going to escalate inflation there,'' said Chen Xingdong, chief China economist at BNP SA in Beijing.

It would be “silly” for Congress to legislate against China’s currency policies given the recent gyrations in financial markets, U.S. Treasury Secretary Henry Paulson told a Senate panel last week.

China has had the largest trade deficit with the U.S. since 2001, due largely to the relative low level of U.S. exports to the Asian trading giant. In 2007 it again hit a record, $256.3 billion.

China also passed Mexico last year to become the second- largest trading partner with the U.S. after Canada. As recently as 2002, Mexico sent more goods to the U.S. than China. Now, Chinese totals are 50% more than Mexican exports to the U.S. The rise of China doesn't mean trade with Canada is falling: imports from Canada increased 3% last year, despite the rise in the Canadian dollar. Imports from China jumped 12% compared with 2006. Chinese exports to the U.S. were rising steadily through the 1990s. They spiked after China entered the World Trade Organization in December 2001 and after global caps on apparel trade expired at the end of 2004.

Even the architect of China's WTO entry is surprised by the speed of its ascent as an economic powerhouse. “No one thought China's re-emergence would be as robust, rapid or consistent as it has been,'' former U.S. Trade Representative Charlene Barshefsky said in an interview. Barshefsky negotiated the U.S. side of China's WTO accession agreement during the Clinton administration. “You will see China continue to rise, despite issues of product safety'' and criticisms by lawmakers, she said.

When Portman took over as the Bush administration's top trade negotiator in April 2005, he announced a “top-to-bottom'' review of China's trade policies and vowed to take a tougher stand against China at the WTO. “China needs to play fairer, and we've had to beef up enforcement,'' he said.

Critics say that the Bush administration hasn't done enough to get China to eliminate subsidies to its exporters, to make sure its products are safe for children and to raise the value of its exports. That's why two Senate panels passed legislation last year aimed at pushing China to raise the value of its currency, which would make its exports more expensive.

Lawmakers say the pressure from industrial states, presidential election dynamics and the growing trade imbalance with China make it likely that Congress will approve legislation this year aimed at China. “This is a major issue in a lot of districts across the country,'' said Ohio Democratic Representative Tim Ryan, a primary co-sponsor of currency legislation. “The more we make the case, this will crank up the pressure on Congress to get something done.''

CBSA Message: Provincial Holiday, February 18

(CBSA)

Message EDI08-016

The following is information concerning this year’s Provincial Holiday in the provinces of Alberta, Manitoba, Ontario and Saskatchewan on Monday, February 18, 2008. For all clients, overnight reports will run the evenings of Friday, February 15 and Monday February 18, as usual. Daily notices/statements covering B3 entry data Friday, February 15 will be generated with a statement date of Tuesday, February 19, if the accounting office is in the province of Alberta, Manitoba, Ontario or Saskatchewan. In all other provinces, these K84’s will be statement dated Monday, February 18, 2008.

Goods released on Monday, February 18 in the provinces of Alberta, Manitoba, Ontario and Saskatchewan will be deemed to be released on Tuesday, February 19, 2008. Goods released in all other provinces on February 18 will be deemed to be released on February 18 , 2008. Any late accounting penalties will be waived without the client having to submit an application. This applies to transactions released from February 11, 2008 to February 18, 2008 that were accounted for in the affected provinces.

Should you have any questions concerning late accounting penalties, please contact Bob Ellah at 613-954-7120.

Confidence in the Economy Plummets

(Nanos Research)

The percentage of Canadians who think the economy will get stronger in 2008 has plummeted an astounding 24 points in 90 days (from 49% in November 2007 to 25% as of last week).

On the personal finance side - there has been a marginal decrease in the percentage of Canadians who think they are better off compared to a year ago (drop from 29% to 24%).

With a perceived downturn in the US economy and volatile markets in Canada, Canadians are basically waiting for the bad economic news even though it hasn’t hit them personally at this time.

Shifting perceptions related to economic confidence may explain the appetite the Conservative government currently has for a federal election.

Canadians were also asked [unprompted] what they would like to see the Government of Canada do to help make the Canadian economy stronger. One in three Canadians were either unsure or thought nothing should be done. The top unprompted response was lower taxes (14%) followed by create jobs/encourage job creation (8%) and invest in key industries (5%). The full list with questions has been posted on the Nanos website as part of the release.

For more detailed information on the methodology and the statistical results visit the Nanos website.

Methodology

Polling was conducted between February 2nd and February 4th, 2008 (Random Telephone Survey of 1,002 Canadians, 18 years of age and older). The aggregate survey results are accurate ±3.1%, 19 times out of 20. Readers should note that the data was weighted for age to match the latest Canadian census results. Results should be considered representative of the Canadian population. Results may not add up to 100% due to rounding.

Results

Question: Thinking of the upcoming year, do you think the Canadian economy will become stronger, weaker or will there be no change?

The numbers in parenthesis denote the change from the previous Nanos Research Survey completed in November, 2007.

Stronger 25% (-24) Weaker 33% (+13) No change 36% (+11) Unsure 6% (NC)

Question: Thinking of your personal finances, are you better off, worse off or has there been no change over the past year?

The numbers in parenthesis denote the change from the previous Nanos Research Survey completed in November, 2007.

Better off 24% (-5) Worse off 16% (NC) No change 58% (+6) Unsure 2% (-1)

WTO Condemns China for First Time, Sides with U.S., EU, Canada on Auto Parts

(The Canadian Press/The Associated Press )

The World Trade Organization issued its first official condemnation of Chinese commercial practices, officials said Wednesday, calling it a victory for the United States, European Union and Canada in a dispute over car parts.

The WTO found that China was breaking trade rules by taxing imports of auto parts at the same rate as foreign-made finished cars, according to trade officials with knowledge of the confidential ruling.

They spoke on condition of anonymity as the decision was still confidential, The Associated Press reports.

The three trade powers argued that the tariff was discouraging automakers from using imported car parts for the vehicles they assemble in China. As a result, car parts companies had an incentive to shift production to China, costing Americans, Canadians and Europeans their jobs, they said.

The ruling, to be officially released in March, will be closely watched by makers of batteries and brakes to seats and spark plugs on both sides of the Atlantic, including U.S.-based Delphi Corp., General Motors’ former parts supplier, and Robert Bosch GmbH in Germany.

The three-member WTO panel delivered its “interim ruling’’ confidentially to the parties on Wednesday. No panel has ever changed its findings between an interim and final decision.

China, which will still be able to appeal, claims the tariffs are intended to stop whole cars being imported in large chunks, allowing companies to avoid the higher tariff rates for finished. It argues that all measures are fully consistent with WTO rules and do not discriminate against foreign auto parts.

But the U.S. and the EU say that China promised not to treat parts as whole cars when it joined the WTO.

Key officials have said they believe the case has ramifications beyond the auto industry.

“It will be instructive to see how China responds,’’ U.S. Trade Representative Susan Schwab said in a recent interview. “If, as we hope and expect, China will be found in contravention of its WTO obligations, hopefully that will help those forces within China that have been advocating reform.’’

WTO cases tend to take years before retaliatory sanctions can be authorized. After the ruling is released, Beijing will be given a “reasonable period of time’’ to make legislative changes. A separate panel would then have to find that Beijing was still breaking the rules.

Emerson Announces Legislative Review of Export Development Canada

(Foreign Affairs and International Trade Canada)

The Honourable David Emerson, Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics, today announced that International Financial Consulting Ltd. has been selected to conduct the 2008 legislative review of the Export Development Act.

The Act requires that the Minister undertake a review of Export Development Canada (EDC) every 10 years in order to provide advice and recommendations to the government and to Parliament on how EDC can best assist Canadian exporters and investors in international commerce.

“EDC plays an important role in supporting Canadian competitiveness in the global marketplace,” said Minister Emerson. “This review provides an opportunity to examine how EDC is evolving, and should continue to evolve, in order to best support Canadian companies that operate internationally.”

International Financial Consulting Ltd. will conduct research and analysis, as well as consult with a broad range of stakeholders, for example, through town hall meetings in major Canadian cities. The final report will be submitted directly to the Minister of International Trade and will inform the Minister’s subsequent advice to the government and to Parliament, expected in the fall of 2008.

International Financial Consulting Ltd. is a leading international consulting firm. Based in Ottawa, the firm specializes in financial services in support of trade, investment and development, with a focus on strategic planning, institutional development and the interface between the public and private financial sectors. The contract for this legislative review was awarded following a competitive bidding process.

For further information on the review, to make a submission, or to participate in the consultations, please visit http://www.EDCReview2008.ca.

D8-2-8: Samples of Negligible Value

(CBSA)

The following is now available on the CBSA Web site: D8-2-8, Samples of Negligible Value (Tariff Item Nos. 9990.00.00 and 9991.00.00)

This memorandum has been entirely revised. Information about tariff item Nos. 9990.00.00, and 9991.00.00, samples of negligible value, value for duty of mutilated samples, and the Samples of Negligible Value Remission Order has been incorporated into the memorandum.

Air Shipping: Politicans Ask GAO to Review Air Cargo Screening Requirements

(Logistics Management)

With a keen eye on the steps being taken to ensure the 100 percent screening of air cargo on passenger planes, politicians are asking the Government Accountability Office (GAO) to review the 100 percent cargo screening requirement on passenger planes by 2010 as outlined in “H.R. 1 Implementing Recommendations of the 9/11 Commission Act of 2007,” which was passed last August and signed into law by President Bush. Read the complete article.

Minister of Finance Announces Two Appointments to the Canadian International Trade Tribunal

(Department of Finance)

The Honourable Jim Flaherty, Minister of Finance, has announced the appointment of André F. Scott as Chair of the Canadian International Trade Tribunal (CITT) and Pasquale Michaele Saroli as a full-time member.

Mr. Scott, currently Vice-President Corporate Affairs, General Counsel and Secretary of Polycor Inc., is a lawyer with 25 years of senior executive and managerial experience in both the public and private sectors. He has an extensive background in arbitration and negotiation.

Mr. Saroli, also a lawyer, has been an employee of the Department of Finance since 1989, and has taken on a number of increasingly senior roles in trade remedies, policy development and negotiations. He has a solid grounding in both administrative and international economic law.

“Both Mr. Scott and Mr. Saroli have extensive international trade experience and will make a valuable contribution to the important work of the CITT,” said Minister Flaherty. “I wish them both well in their new duties.”

Customs-Trade Partnership Against Terrorism: A Year in Review

(U.S. Customs and Border Protection)

The Customs-Trade Partnership Against Terrorism (C-TPAT) and its focus on strengthening supply chain security is an important layer in U.S. Customs and Border Protection’s (CBP) cargo enforcement strategy. Through this initiative, CBP is asking businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain.

The partnership, referred to as C-TPAT, has performed more than 6,900 total validations since 2003.

“Our supply chain specialists are traveling throughout the world, working with C-TPAT members to protect international commerce from the risk of terrorist incident,” said C-TPAT Director Bradd Skinner.

C-TPAT accomplishments during calendar year 2007 include:

• Supply chain security specialist visited manufacturing and logistics facilities in 79 countries, representing some of the most terrorist prone and high risk areas of the world.

• C-TPAT validated 3,011 supply chains, representing a 27 percent increase from 2006. Of the 3,011 validations conducted, 601 or 20 percent were revalidations. This was the first year that C-TPAT began re-verifying supply chains.

• C-TPAT certified 2,601 new members in accordance with SAFE Port Act requirements.

• C-TPAT Tier III status was granted to 17 companies as a result of the validation process.

• C-TPAT suspended or removed 112 companies from the program for security breeches or failure to meet C-TPAT’s minimum security criteria as revealed in the validation process. Of the 112 companies, 47 were either conditionally or fully reinstated in the C-TPAT program after they demonstrated to CBP’s satisfaction that immediate and sustained corrective action had been taken.

Supply chain security specialists conducted on-site visits to review the security practices of those members that were involved in a security breech. Without exception no additional security breeches occurred once these companies were reinstated.

• C-TPAT made progress on additional SAFE Port Act mandates including the development of a 3rd Party Validation pilot program.

• To enhance the supply chain security processes and procedures of its members, minimum-security criteria were issued for Mexican long haul carriers, U.S. and foreign-based marine port authority and terminal operators, foreign manufacturers and air carriers. These criteria were developed in close consultation with the trade community and other US agencies where appropriate.

• C-TPAT signed a mutual recognition agreement with New Zealand’s Customs Service and established work plans with several other countries to achieve similar arrangements.

• With respect to outreach, C-TPAT conducted enrollment seminars along the southwest border, in Mexico City and during its annual trade conference. Additionally, C-TPAT participated in more than 100 conferences and seminars throughout the world.

The University of Virginia conducted a survey on behalf of CBP to determine member’s perceptions regarding the cost, benefits and motivations to join the program. The results demonstrated that C-TPAT has moved thousands of companies to provide closer scrutiny to the security of the goods they handle and to ensure that their overseas suppliers have implemented sound security practices. C-TPAT will undertake future studies of this sort to assess its effectiveness.

“When you consider what C-TPAT accomplished in 2007, you can see that we are producing solid results” said Skinner. “We met the SAFE Port Act’s certification and validation requirements and that is a key metric for us. We are holding members accountable to meet their commitments to the program but doing so in the spirit of collaboration.”

Learn About Best Practices for Importing Safe Food Products from China and Emerging Markets

I.E.Canada, along with its Food Committee, is inviting members of the food industry to attend I.E.Canada’s 3rd Annual Food Forum. The Food Forum is Canada’s premier event for members of the government and industry to share knowledge and exchange information. Building on the success of previous years, this event will offer opportunities for education, knowledge sharing, and networking.

Food safety compliance will be to focus of this year’s Forum. Import product safety has become one of the priorities for governments and businesses world wide. The need for systems that both ensure the integrity of Canada’s food supply and protect consumers from any mishaps that could occur has come into sharp focus. Ensuring that our processes ensure imported foods are safe is critical to maintaining Canadian consumer confidence in our food industries.

One of the key sessions is “Practices for Importing Safe Products from China and Emerging Markets”, a panel discussion with:

Christine Lowry, Vice President, Nutrition and Corporate Affairs, Kellogg Canada Inc. (invited), Mark FeDuke, Traffic Manager, VLM Food Trading International Inc., John Kukoly, Product Manager, Food Safety and Organic Certification, QMI

When: Wednesday, February 20, 2008

Where: Hilton Toronto Airport, 5875 Airport Road, Mississauga, Ontario

Registration information is available here. For further information on the conference, please call Jason at 416-595-5333 ext 37

BTS Releases North American Surface Trade Numbers for November 2007

(U.S. Department of Transportation)

Surface trade with Canada and Mexico rose 8.6% from November 2006

Trade using surface transportation between the United States and its North American Free Trade Agreement (NAFTA) partners Canada and Mexico was 8.6% higher in November 2007 than in November 2006, reaching $70.4 billion, according to the Bureau of Transportation Statistics (BTS) of the U.S. Department of Transportation (Table 1).

The value of U.S. surface transportation trade with Canada and Mexico fell 5.2% in November from October (Table 2). Month-to-month changes can be affected by seasonal variations and other factors.

Surface transportation consists largely of freight movements by truck, rail and pipeline. About 90% of U.S. trade by value with Canada and Mexico moves on land.

The value of U.S. surface transportation trade with Canada and Mexico in November was up 51.9% compared to November 2002, and up 91.3% compared to November 1997, a period of 10 years (Table 3). Imports in November were up 103.1% compared to November 1997, while exports were up 78.0%.

U.S. Surface Transportation Trade with Canada

U.S.–Canada surface transportation trade totaled $45.2 billion in November, up 11.5% compared to November 2006 (Table 4). The value of imports carried by truck was 4.9% higher in November 2007 than November 2006, while the value of exports carried by truck was 15.1% higher.

Michigan led all states in surface trade with Canada in November with $7.3 billion (Table 5). …

The full press release, with tables, can be found here.