International trade and commercial transactions in Canada: overview
A Q&A guide to the regulation of international trade and commercial transactions in Canada.
The Q&A covers key matters relating to sale of goods contracts, including rules on formation, price and payment, delivery, passing of title and risk, variation and assignment, enforcement and remedies, exclusion of liability, choice of law and jurisdiction, and arbitration. It also provides an overview of the rules governing storage of goods, imports, trade remedies, exports and international trade restrictions.
To compare answers across multiple jurisdictions, visit the international trade and commercial transactions Country Q&A tool.
This Q&A is part of the International Trade and Commercial Transactions Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/internationaltrade-guide.
Canada's new Federal Government, elected in October 2015, is more ambivalent toward trade and investment agreements than its predecessor. It has remained publicly non-committal about ratifying the Trans-Pacific Partnership Agreement, although it signed the agreement in January 2016 along with the 11 other participating parties and appears likely to ratify it if the US and Japan do so. By contrast, the Government has been unequivocally supportive of the Canada - European Union Comprehensive Economic and Trade Agreement (CETA), the negotiations of which were concluded under the previous Canadian Government in September 2014. The new Government was willing to accept significant changes to the investor-state dispute settlement mechanism in the CETA in order to reach agreement with the EU on a final text, which was announced on 29 February 2016. While some hurdles remain, it now appears that the CETA could enter into force in 2017.
Canada remains involved in other trade agreement negotiations, notably the plurilateral Trade in Services Agreement.
Canada continues to expand its network of bilateral investment treaties, known in Canada as foreign investment promotion and protection agreements, with a focus on countries of interest to Canadian companies in the oil and gas and mining sectors, particularly in sub-Saharan Africa, and other economies where Canada has significant investment interests, notably Hong Kong.
In response to Russia's actions in Ukraine, Canada has imposed economic sanctions targeting Russian oil exploration activities and a range of Russian and Ukrainian individuals and entities, including financial institutions. The Canadian sanctions are similar to, and have been gradually expanded along with, those imposed by the US and the EU.
However, the new Government is generally less disposed towards imposing or maintaining economic sanctions than was its predecessor. In response to the P5+1 process, Canada has now lifted its broad economic sanctions on Iran, although more targeted sanctions remain on individual and entities close to the Iranian regime, and on military and nuclear proliferation-related items. It has also announced the imminent lifting of a ban imposed by the previous government on exports to Belarus.
In the domestic context, Canada continues to be active in initiating trade remedy investigations in a wide range of industries. Although new Canadian trade remedy investigations frequently mirror similar investigations in other jurisdictions, a number of trade remedy findings have been reviewed and renewed several times, resulting in protection being afforded to certain domestic industries for several decades. The Government of Canada has also launched consultations on potential changes to Canada's trade remedy laws that in particular would make it easier for anti-dumping complaints to succeed and for remedies to be enforced, particularly for non-market economies and industrial sectors that may be influenced by government or public bodies. These consultations implicitly contemplate methods to address imports primarily from China in the event that an understanding develops that China is to be treated as a market economy for anti-dumping purposes after 2016.
Information about Canada's trade negotiations and agreements can be found on the website of Global Affairs Canada (formerly the Department of Foreign Affairs, Trade and Development) (www.international.gc.ca/trade-agreements-accords-commerciaux/index.aspx?lang=eng).
Contracts for the sale of goods
Canadian Legal System
The Canadian legal system is based on two distinct legal traditions. In most provinces and territories in Canada, the legal system is derived from the English precedent-based system of common law. In these provinces and territories, the law consists of both the recorded judgments of the courts and statutes passed by democratically elected legislative bodies. The legal system in the province of Québec derives from the Roman civil law system, which was adopted in France under the Code Napoléon. In Québec, the law is set out and codified in the Civil Code.
Duty to negotiate contracts in good faith
Traditionally, courts in the common law provinces of Canada have refused to recognise a duty of good faith in contractual negotiations (Martel Building Ltd v Canada,  2 SCR 860 at para 73). However, the Supreme Court of Canada (SCC) recently recognised, in Bhasin v Hrynew (2014 SCC 71,  3 SCR 495), that there is an organising principle of good faith that underpins and manifests itself in the common law of contractual performance in Canada. In particular, the SCC held that the "organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of a contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner". The SCC also noted that the organising principle of good faith does not require parties to serve the interests of the other parties in all cases. Rather, "it merely requires that a party not seek to undermine those interests in bad faith".
In addition, the SCC recognised a duty of honest performance in contractual relationships as flowing directly from the common law organising principle of good faith. Specifically, the SCC held that "under this new general duty of honesty in contractual performance, parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract". In establishing the new duty of honesty in contractual performance, the SCC was careful to clarify that it does not impose a duty of loyalty or disclosure, or require a party to forego advantages flowing from the contract.
The requirement to act in good faith has long been established in Québec. In particular, the Civil Code of Québec provides for a broad duty of good faith, which extends to the creation, performance and termination of contractual arrangements (Articles 6, 7 and 1375).
The doctrine of unconscionability developed out of the principles of equity. In summary, the doctrine of unconscionability aims to grant relief in transactions where there is inequality in bargaining power that adversely impacts the position of the weaker party. Under contract law, the existence of an unconscionable transaction requires both (Norberg v Wynrib,  2 SCR 226,  SCJ No 60 at para 41):
Proof of inequality in the position of the parties to the agreement.
Proof of an improvident bargain.
Where a contract is found to be unconscionable, the most common form of remedy is rescission (Gindis v Brisbourne, 2000 BCCA 73, leave to appeal refused (2001),  1 SCR xi.). However, damages can be awarded where rescission is not appropriate in the circumstances.
The primary legislation applicable to sale of goods contracts in Canada are the provincial Sale of Goods Acts. These have been enacted in all provinces and territories, except in Québec where the regulation of the sale of goods is governed by its Civil Code. In practice, the law in Québec has developed similarly to that of the other provinces and territories.
There are a number of other pieces of legislation that relate to the sale of goods, notably the provincial:
Personal Property Security Acts, which regulate security agreements.
Consumer Protection Acts, which may apply to certain transactions (requiring the disclosure of certain information, or implying terms and conditions into sale of goods contracts).
Many Canadian jurisdictions also have a Factors Act, which extends the rights of agents in dealing with goods in certain circumstances.
Ontario is the only province to have a Bulk Sales Act, which applies to the sale of stock in bulk out of the usual course of business or trade of the seller. Shareholder approval is required in the case of a sale of all or substantially all of the assets of a corporation, along with additional requirements.
The United Nations Convention on Contracts for the International Sale of Goods (CCISG) was implemented in Canada by the International Sale of Goods Contracts Convention Act 1992. The CCISG has subsequently been incorporated into provincial legislation by all Canadian provinces and territories. The CCISG governs contracts for international sales of goods between businesses, and excludes sales to consumers, sales of services and sales of certain other goods. Provincial legislation only applies to contracts for sales of goods between parties in contracting states, generally by choice of the contracting parties.
Sale of goods contracts subject to the CCISG in Canada generally exclude its applicability. It is excluded most commonly because of the difficulty of Canadian courts to recognise and apply provincial legislation implementing the CCISG. Parties generally prefer to choose Canadian law or equivalent contract law of another jurisdiction. In international sale of goods transactions, parties tend to prefer to apply one or the other's domestic laws rather than applying provisions based on the CCISG.
Standard contractual terms
The International Chamber of Commerce international commercial terms (Incoterms) 2010 are commonly used for drafting sale of goods contracts in Canada. In addition, Canadian banks involved in international sale of goods transactions typically adopt the Uniform Customs and Practice for Documentary Credits and the Uniform Rules for Demand Guarantees, where applicable.
All adult persons who are competent have the capacity to contract. Under corporate statutes, corporations have the powers of a natural person and therefore have the capacity to contract. However, the capacity of corporations to enter into contracts can be limited by the corporation. The status of a foreign corporation is governed by the law of the corporation's domicile, which determines matters such as the corporation's powers, its capacity to contract, and the persons entitled to act on its behalf.
When a corporation enters into bankruptcy, it loses its capacity to dispose of or otherwise deal with its property. Those rights vest in the trustee in bankruptcy. However, if a party enters into a contract with the bankrupt corporation for value without notice of the bankruptcy, that party's rights are protected by bankruptcy legislation and the contract will be valid and enforceable.
Partnerships are not distinct legal entities. The authority of partners to bind a partnership is based on agency law. Every partner is both the principal and the agent of the other partners and of the partnership. As such, partners can enter into contracts on behalf of the partnership. To bind the partnership, the partner must be acting in the ordinary course of business of the kind carried on by the partnership. Actions taken in the ordinary course of business have binding effect whether or not the partner had actual authority to take such actions. However, if a partner is acting without authority and the other party to the contract is either aware that the partner lacks authority or does not believe him or her to be a partner, that partner's unauthorised actions will not have binding effect.
Municipalities in Ontario have the capacity, rights, powers, and privileges of a natural person and can therefore enter into contracts (Chapter 25, section 9, Municipal Act, 2001, S.O. 2001). Provincial governments can also enter into contracts.
The Government of Canada also has the capacity to enter into contracts. To have binding effect, the contract must be:
Within the capacity of the government.
Made by a servant or agent acting within the scope of his authority.
The law governing the contract will typically be determined in accordance with the law of the province where the cause of action relating to the contract arises.
In Canada, the substantive elements required to create an enforceable contract are:
Intention to create legal relations.
Offer and acceptance.
Capacity to contract.
Intention to create legal relations. Generally, an agreement is only enforceable where the parties have entered into the agreement with the intention of creating legal obligations. Although courts generally presume an intention to create legal relations in commercial transactions, courts also examine the conduct of parties when seeking to determine whether an intention to create legal relations exists.
Offer and acceptance. An offer is a communication or indication by the offeror to the offeree of the offeror's desire to enter into a legally enforceable agreement with the offeree on certain terms. The communication of an offer can be made in writing or orally, and can also be inferred from the conduct of the offeror.
The acceptance of an offer must be communicated by the offeree to the offeror. The acceptance must be unequivocal. If the offeree varies or alters any of the terms of the initial offer, this will be considered as a counter-offer, not as an acceptance.
Consideration. For a contract to be legally enforceable, each party to the agreement must exchange or provide something of value in consideration for the promise(s) of the other. However, contracts made under seal are binding regardless of any consideration.
Capacity to contract. In addition to the requirements set out above, for a valid contract to exist, both parties must possess the capacity or ability to understand the terms and obligations created by the contract. Generally, any person, whether an individual or legal entity, can enter into any contract that is not prohibited by law. The two exceptions to this general rule concern:
Persons of diminished mental capacity.
The requirement for capacity ensures that parties who are unable to understand or consent to certain terms are protected from inadvertently entering into or creating contractual relationships that may be adverse to their interests. Corporations are generally afforded the same right as natural persons to enter into contracts, although this right may be subject to certain requirements in the corporation's constitutional documents (see Question 4, Corporations). Special rules exist for contracts entered into on behalf of a corporation before its creation or incorporation.
Lawful purpose. Even if all the substantive elements required to create a legally enforceable contract are met, a contract may be unenforceable or void where its terms are contrary to public policy or law.
Formalities. There are generally no formal requirements governing the formation of a valid and enforceable contract. A valid contract can be established orally, in writing, or inferred from the conduct of the parties to the agreement, provided that all the substantive requirements necessary to create a legally enforceable contract have been satisfied (see above, Substantive requirements).
However, certain exceptions apply. Most noteworthy are the requirements under the English Statute of Frauds and its various re-enactments in Canada, which remain in force in all Canadian common law jurisdictions, except British Columbia and Manitoba. The Statute of Frauds and its re-enactments impose certain formal requirements (for example, written form), for contracts including:
Contracts for the sale of land or any interest in land.
Contracts not to be performed within one year.
In some cases, domestic contracts involving promises of estate trustees and administrators.
E- commerce. In Canada, the e-commerce regime is governed by the:
Personal Information Protection and Electronic Documents Act (PIPEDA) at the federal level.
Various provincial and territorial e-commerce statutes.
Both PIPEDA and provincial and territorial e-commerce legislation are designed to create a media-neutral legal environment, such that paper-based and electronic-based information are treated equally at law. This is primarily accomplished through the "functional equivalency rules" under the various provincial and territorial e-commerce statutes. For example, the provincial and territorial statutes generally provide that a contract is not invalid simply because it is in electronic form. Courts in Canada have recognised the enforceability of both "click-wrap" agreements and "browse-wrap" agreements (see for example, Rudder v Microsoft Corp (1999), 106 OTC 381, 2 CPR (4th) 474).
However, some e-commerce statutes do not apply to certain documents. For example, in Ontario, the Electronic Commerce Act does not apply to:
Wills and codicils.
Trusts created by wills or codicils.
Certain powers of attorney involving individuals' financial affairs and personal care.
Agreements for the purchase and sale of land.
Documents belonging to a certain prescribed class.
The PIPEDA also regulates the use and admissibility of electronic documents in legal proceedings. In addition, parties seeking to produce electronic or digital material in court should be aware of the requirements under the Canada Evidence Act. This Act requires that a party seeking to have an electronic document admitted as evidence has the burden of proving its authenticity by evidence capable of supporting a finding that the electronic document is what the party purports it to be.
Language requirements. English is commonly used in international contractual arrangements. Under the Principles of the International Institute for the Unification of Private Law (UNIDROIT Principles), where a contract is drafted in two or more languages that are equally authoritative and in the event of a dispute or discrepancy between the versions, there is a preference for the version in which the contract was originally drafted (Article 4.7).
Canada is a bilingual nation where English and French are both official languages. This is especially important for persons considering doing in business in Québec, where the Charter of the French Language requires contracts that are pre-determined by one party, or those that contain printed standard clauses, to be in French (Chapter 11, section 55). To avoid this requirement, parties to a contract must expressly request that the contract be executed in another language.
Price and payment
The seller has a duty to deliver the goods to the buyer and the buyer has a duty to accept the goods and pay for them in accordance with the terms of the contract.
If the price is not fixed at the time the contract is entered into, it can be fixed later in a manner agreed to by the parties, or it can be determined by the course of dealings between the parties. If not, the purchaser must pay a "reasonable price". What constitutes a reasonable price is a question of fact and will depend on the circumstances of each case.
If the price is to be fixed by a third party, the agreement is avoided if the third party does not or cannot make the valuation. However, if the goods (or a portion of them) have been delivered to, and appropriated by, the buyer, the buyer must pay a reasonable price. If the third party is prevented from making the valuation by the fault of either party, the innocent party can bring an action for damages against the party at fault.
Time of payment
Unless the parties agree otherwise, the buyer must pay the price of the goods at the time of delivery.
Provisions relating to the time of payment are not of the essence unless a different intention appears from the terms of the contract. Whether any other provision relating to time is of the essence depends on the circumstances of the contract.
Method and place of payment
Method. While the normal method of payment is by cash, the parties can agree to any form of payment, provided that the substantial consideration is money. This can include "trade-ins" of other goods for a portion of the purchase price, provided that this does not amount to a barter agreement (rather than a sale of goods contract).
Place. Unless otherwise agreed by the parties, the price must be paid at the seller's place of residence.
The seller has a duty to deliver the goods to the buyer, and the buyer has a duty to accept and pay for them in accordance with the terms of the contract. Unless the parties agree otherwise, the seller must give possession of the goods to the buyer in exchange for the price.
Expenses relating to delivery are borne by the seller, unless otherwise agreed by the parties.
Time of delivery
Where the seller must deliver the goods to the buyer but no time of delivery has been agreed in the contract, the seller must deliver them within a reasonable time. What is considered to be a reasonable time is a question of fact.
Delivery must also be made at a reasonable hour of the day, or it may otherwise be treated as ineffective. What is considered to be a reasonable hour is also a question of fact.
Method of delivery
Delivery is effected when the purchaser obtains physical possession of the goods. However, "symbolic" delivery is possible if certain conditions are met.
If the goods are in the possession of a third party, that third party must acknowledge to the buyer that the goods are being held on the buyer's behalf.
Place of delivery
The parties can expressly or impliedly agree that delivery will take place at the seller's or at the buyer's place. However, if no such agreement exists, the place of delivery is the seller's place of business. If the seller does not have a place of business, the place of delivery is the seller's place of residence. If the contract is for the sale of specific goods that, to the knowledge of the parties at the time the contract is made, are in some other place, then that place is the place of delivery.
Passing of title and risk
Generally, title passes to the buyer at the time intended by the parties. The various provincial Sale of Goods Acts set out harmonised rules for determining the intention of the parties. However, these rules can be rebutted by evidence that the parties intended otherwise. The rules are outlined below:
Rule one. Where there is an unconditional contract for the sale of specific goods in a deliverable state, title to the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment or delivery (or both) is postponed.
Rule two. Where there is a contract for the sale of specific goods and the seller must put them into a deliverable state, title does not pass until this is done and the buyer has notice that it has been done.
Rule three. Where there is a contract for the sale of specific goods in a deliverable state but the seller must weigh, measure, test or do some other act in relation to the goods for the purpose of ascertaining the price, title does not pass until such act or thing is done and the buyer has notice that it has been done.
Rule four. When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, title passes to the buyer when the buyer signifies approval or acceptance to the seller, or does any other act adopting the transaction. If the buyer does not signify approval or acceptance to the seller but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, title passes on the expiration of such time. If no time has been fixed, title passes on the expiration of a reasonable time. What is a reasonable time is a question of fact.
Rule five. Where there is a contract for the sale of unascertained or future goods by description and goods of that description in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, title passes when such assent is given (expressly or impliedly, whether given before or after the appropriation is made). Where under the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and there is no retention of title clause, the seller is deemed to have unconditionally appropriated the goods to the contract.
Retention of title clauses (or reservations of the right of disposal) are valid and enforceable for the sale of specific goods, or goods that are not specific but are subsequently appropriated to the contract. These clauses are typically used to protect the seller against the risk of the buyer going into receivership or liquidation. Therefore, the conditions to be fulfilled in order for title to pass typically relate to payment of the price. If a contract contains a retention of title clause, title to the goods does not pass to the buyer until the conditions are fulfilled, regardless of whether the goods have been delivered to the buyer, carrier or other bailee, as the case may be.
The right of disposal is most likely to be reserved for sales involving bills of lading. In these cases, title to the goods sold passes conditionally where the bill of lading is made out in favour of the vendor, unless there is evidence to the contrary. Bills of lading are governed by the Bills of Lading Act (a federal statute).
Unless the parties agree otherwise, the seller bears the risks associated with the goods until the property is transferred to the buyer. The buyer assumes the risk as soon as title to the goods is transferred to the buyer, regardless of whether delivery has actually occurred. However, where delivery has been delayed due to the fault of either the buyer or seller, the goods are at the risk of the party at fault for any loss that would not have occurred but for such fault.
Variation and assignment
There are no provisions in the provincial Sale of Goods Acts regarding the assignment of rights and liabilities under a sale of goods contract. Assignment is governed by the general law of contract. Clauses that expressly prohibit assignment are generally held to be valid and effective.
Assignment of rights or benefits. Case law suggests that a party to a sale of goods contract can assign the price which it is to receive for the goods sold or the goods themselves, provided that the other party to the original contract is not unduly burdened or jeopardised.
Assignment of liabilities. Case law suggests that if the other contracting party consents, or if the personality of the performing party is not material, "vicarious performance" can be permitted. In these cases, the assigning party remains liable under the contract and can be held responsible for any failure to perform.
Formalities. In most provinces, assignment is regulated in a manner that is similar to earlier English legislation. For example, under section 20 of Ontario's Judicature Act, the assignment of a a debt or other legal chose in action is effective if it is made in writing and express written notice has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action. The assignment transfers:
The legal right to the debt or chose in action from the date of the notice of the assignment.
All legal and other remedies for the debt or chose in action.
The power to give a good discharge for the debt or chose in action.
An assignment that does not conform to the statutory requirements may still be valid under equity rules. However, in these cases, the assignee must join the assignor as a party in any proceedings to enforce his rights.
A party can transfer its liabilities through novation. Novation is the act of making a new contract that discharges the old parties and creates a new relationship between new parties. Unlike assignment, novation discharges the original debtor from liability under the contract.
At common law, parties are free to waive contractual rights and obligations. If the relevant term was included for the benefit of one party only, that party can waive the term unilaterally. If the term was included for the benefit of both parties, waiver must be bilateral.
Under general contract law, a breach of warranty allows the buyer to recover damages, whereas a breach of condition by the seller allows the buyer to repudiate the contract. Under the provincial Sale of Goods Acts, when a seller does not meet a condition, the buyer can waive the condition, and common law rules govern the relations between the parties. Alternatively, the buyer can treat the breach of the condition as a breach of warranty.
However, unless there is an express or implied term in the contract, the breach of any condition by the seller must be treated as a breach of warranty in cases where either:
A contract of sale is not severable and the buyer has accepted the goods (or part of such goods).
A contract is for specific goods, the property of which has passed to the buyer.
Parties can also exclude certain express or implied terms. This differs from the subsequent waiver of a right arising under the contract of sale. However, in many provinces, legislation prohibits the exclusion of certain terms that are implied under the Sale of Goods Acts or other applicable statutes (for example, in consumer sales).
Enforcement and remedies
In all Canadian jurisdictions, sale of goods legislation (and in Québec, Book 5 of the Civil Code of Québec (CCQ)) imply terms concerning the description and quality of goods in certain circumstances.
In the common law provinces, there is an implied term that goods will be:
Reasonably fit for a purpose, if the buyer makes it known to the seller that it is relying on the seller's skill or judgement and the seller acts in the course of business.
Of merchantable quality, when the goods are bought by description and the seller acts in the course of business.
Terms as to quality or fitness may also be implied at common law where they are necessary to give business efficacy to the contract. Parties can exclude or limit these terms in the contract. However, sellers may not be able to exclude liability for manifestly defective goods.
In Québec, the CCQ implies a seller's warranty that the good is "free of latent defects which render it unfit for the use for which it was intended" or that diminish its usefulness (Article 1726). Parties can vary these terms in the contract, but the seller cannot exclude liability arising from its personal faults (Article 1732, CCQ).
Consumer protection legislation includes similar and additional terms. However, in most Canadian jurisdictions, consumer protection laws prohibit the exclusion of these terms in retail sales.
Other federal and provincial or territorial legislation may also apply to the description and quality of certain specific goods. For example, in some provinces, there are specific warranties for farm implements, requiring that these goods be "properly constructed" and "in good working order".
Product liability is governed by common law rules. Manufacturers owe four types of duties to consumers:
To ensure that there are no manufacturing defects.
To warn of dangers inherent to the use of their products.
To design products that are safe and reasonably safe for their intended purposes.
To compensate consumers for the repair of dangerous products.
The CCQ reflects similar principles (Articles 1468 and 1469).
Contractual terms can be express or implied, and construed as warranties or conditions.
Conditions are contractual terms the performance of which goes to the whole consideration of the contract, whereas warranties are promises that attach to the contract. Whether a term is a condition or warranty determines the remedies available to buyers. A breach of warranty gives rise to a claim for damages. A breach of condition entitles the buyer to terminate the contract. The innocent party can also make concurrent claims in tort (for example, negligent misrepresentation).
Québec law does not make the same distinctions. The breach of any contractual obligation entitles a party to seek one of the following remedies:
Resolution or resiliation (that is, termination) of the contract for serious breaches (Article 1604, Civil Code of Québec (CCQ)).
Specific performance (Article 1601, CCQ).
Reduction of obligations (Article 1604, CCQ).
Damages (Article 1607, CCQ).
In addition, there is no choice between contractual and extra-contractual remedies in Québec, meaning that a party to a sale of goods contract is limited to contractual remedies (Article 1458, CCQ).
Remedies are also discussed in Question 18.
The Supreme Court of Canada has relaxed the doctrine of privity of contract, although its scope remains unclear. In some cases, third parties can take action to enforce certain contractual rights (for example, beneficiaries of life insurance and assignees). There are also notable statutory exceptions to the rules on privity. For example, Saskatchewan's consumer protection legislation provides that privity is not a defence to any action where a person brings an action against a retail seller, manufacturer or warrantor.
Under the Civil Code of Québec (CCQ), a third party can have rights under a contract if these rights are expressly stipulated in the contract (Article 1444). In addition, rights that are accessory to or related to property pass to successors in title (Article 1442, CCQ).
Void contracts are those that are not effective. Voidable contracts are those that can be rescinded by one party as a result of a defect in the contract's formation.
Under the Civil Code of Québec (CCQ), there is a similar distinction between:
Contracts that are absolutely null (that is, contracts made in contravention of a public interest and that can be set aside by a court on application of any interested party).
Contracts that are relatively null (that is, contracts made in contravention of a private interest and that can be set aside by a court on application of the co-contractor).
Contracts can be void for a number of reasons, for example:
Contracts involving certain types of goods (such as illegal narcotics and restricted firearms).
Contracts that further an unlawful purpose.
Common law courts may grant the discretionary remedy of avoiding a contract on the basis of unconscionability, where there is inequality of bargaining power and an unconscionable use of power. In Québec, the CCQ grants relief from excessively and unreasonably detrimental clauses in consumer contracts or contracts of adhesion (Article 1437).
The law of contractual misrepresentation is complex and it is unclear when a buyer will be entitled to rely on misrepresentation to rescind a contract or to seek damages only. A seller's fraudulent misrepresentation entitles the buyer to rescission and damages in tort. If a misrepresentation is innocent, a buyer may be entitled either to seek rescission (if the representation is found not to be part of the contract) or to damages (if the representation is part of the contract). Consumer protection legislation also provides for various remedies for misrepresentation in the context of sales of goods to consumers. The federal Competition Act similarly provides civil remedies for misleading advertising. Finally, a customer can claim both negligent misrepresentation and breach of a collateral contract where he relies on a supplier's negligent misrepresentation to purchase a product (see Question 14).
Mistake also affects the validity of contracts. Generally, Canadian common law does not allow a party to escape contractual liability because of a mistake of law regarding that party's legal rights or obligations. A mistake of fact by both parties about the substance of a transaction renders a contract void. A mutual mistake is one where the parties disagree as to an essential term, therefore precluding the formation of a contract. However, a unilateral mistake, which was not induced or known by the other party, does not invalidate a contract unless there is fraud or unconscionable conduct.
In Québec, misrepresentation and mistake are governed by the CCQ's rules on error. There is no distinction between mistakes of law and mistakes of fact. An error occurs where the buyer relies on a mistaken set of facts to conclude a contract. Where an error that is excusable relates to the nature, object or other essential part of the contract, the error vitiates consent (Article 1401, CCQ). An error provoked by fraud that induces a buyer to enter into a contract also vitiates the buyer's consent (Article 1401, CCQ). A buyer who contracts by error can seek annulment of the contract, damages, or can seek to reduce his obligations (Article 1407, CCQ).
A party is entitled to treat the contract as terminated when the other party either:
Breaches a condition of the contract.
Indicates by its conduct or words the intention not to honour the contract.
The parties can freely terminate their contracts by agreement.
The rules relating to rescission in Québec are explained in Question 14. In addition, the jurisprudence and doctrine in Québec recognise a similar right to treat the contract as terminated in cases where the other party manifests its intention not to perform the contract (Expo Promotion inc c Expression Aménagement extérieur inc, 2010 QCCQ 3085 at para 41).
In Bhasin v Hyrnew (2014 SCC 71), the Supreme Court of Canada recognised that there is a general duty of honest performance, meaning that parties must not lie or mislead each other. However, there appears to be no general duty to co-operate under Canadian common law, although such a duty has been found in the context of sales of land. The obligation of good faith in Québec imposes a duty to co-operate on contractual parties.
"Best efforts" and "reasonable efforts" clauses are also found in Canadian contracts. A best efforts commitment indicates a supplier's obligation to take all reasonable efforts to achieve its objective. However, this commitment does not amount to an unqualified guarantee that an event will occur. A reasonable efforts commitment is less onerous and does not require a party to take all possible steps, but only steps that are reasonable in the circumstances (1092369 Alberta Ltd v Joben Investments Ltd, 2013 ABQB 310 at paras 73-74).
When a party can no longer perform the contract because the performance has become impossible or otherwise frustrated, the parties are discharged from performance. Force majeure clauses are common and excuse performance on the occurrence of certain events, such as acts of god, riots, strikes and civil war.
The main remedies for breach of a sale of goods contract include:
Damages (for breach of warranty).
The right of rescission or repudiation (for breach of condition).
The buyer may also claim damages for misrepresentation.
In Canada, damages are a pecuniary compensation that aims to put the harmed party in the position it would have been in had the contract been performed as specified. Damages are those that were fairly and reasonably considered as arising naturally from the breach of the contract at the time the contract was formed. In Québec, damages are those that were foreseen or foreseeable at the time the contract was made, and only include the immediate and direct consequences of non-performance (Article 1613, Civil Code of Québec (CCQ)). The plaintiff may also claim non-pecuniary damages for pain and suffering, but those are capped at Can$100,000.
A party that suffers a loss because of a contractual breach has a duty to mitigate its losses. This includes taking reasonable corrective action and avoiding the use of defective goods.
Other remedies for breach of contract are also available. For example, specific performance can be sought to enforce sale of goods contracts for unique items, although this remedy has not been granted for ordinary commercial goods. Parties can also seek injunctive relief to restrain a wrongful act. Injunctions are governed by equitable principles and will be granted where the following conditions are met:
Damages are not an adequate remedy and there is a threat of repetition of the wrong.
There is an immediate threat of injury.
The party seeking relief is not acting unfairly or wrongly.
In Québec, similar and additional remedies are available:
Resolution or resiliation is available for serious breaches (Article 1604, CCQ).
Reductions of obligations allow a party to reduce its corresponding obligations under a contract where the obligation is of such a nature that it can be reduced (Article 1604, CCQ).
Specific performance is only allowed "in cases which admit of it" (Article 1601, CCQ).
Courts in the common law provinces allow rectification, which enables parties who were in agreement as to the terms of a contract but expressed them incorrectly to correct the mistakes. Rectification requires the existence of an inconsistent prior oral agreement and the courts do not attempt to ascertain the intention of the parties, but only the form of the prior oral agreement (Shafron v KRG Insurance Brokers (Western) Inc, 2009 SCC 6 at para 53). However, under Québec law, courts rectify contracts through looking to the true intentions of the parties (Québec (Agence du Revenu) v Services Environmentaux AES inc, 2013 SCC 56 at para 48).
The buyer can claim damages for non-delivery, late delivery, and breach of terms regarding quality and description. If the seller neglects to or refuses to deliver the goods to the buyer, the buyer has an action for damages. Sale of goods legislation does not specifically address the consequences of late delivery, but requires delivery within a reasonable time. Breach of this term may entitle the buyer to claim damages (if the term is a warranty) or rescission (if the term is a condition). The seller's breach of warranty as to quality entitles the buyer to claim damages. If the buyer is compelled to accept delivery, despite a breach of warranty or condition, then the buyer can also claim a right of set-off.
If the seller delivers goods that vary from the amount originally contracted, the buyer can choose to either:
Accept the goods and pay the full contract rate.
Reject the goods.
The seller must deliver goods that correspond to their description, although trivial differences will be disregarded. The buyer can reject goods that do not correspond to the description.
In Québec, in the case of non-delivery, the buyer is entitled to terminate the contract unilaterally. The same rules govern non-conforming goods. Breaches of the warranties of quality and durability entitle the buyer to termination of the contract (where the breach is serious), reduction of the price and/or damages.
Under sale of goods legislation, non-payment gives the seller the right to:
When the seller continues to have possession of the goods and the buyer has title to them, but has not yet paid for them, the seller can place a lien on the goods (unpaid vendor lien). The lien allows the unpaid seller to retain the goods and to stop their shipping if the buyer becomes insolvent. In addition, a seller can bring an action for the price or for damages.
If title to the goods has passed to the buyer and the buyer accepts them, the seller can bring an action for the price. But if title has not passed and the buyer does not accept the goods, the seller has an action for damages. If the buyer has property in the goods but has refused to accept possession, the seller has the option to claim damages or bring an action for the price.
In Québec, the unpaid seller's remedies include the right to terminate the contract and retrieve the goods or to claim the price of the goods. Before seeking resolution of the contract, however, the unpaid seller must ensure that the buyer was in default or was put into default by demand letter. Subject to certain conditions, an unpaid seller that has resolved the contract can seize the goods before judgment. If the seller has a contractual security interest (hypothec) over the goods of a person in default, the seller can also assert these rights.
Exclusion of liability
Exclusion or exemption clauses are a relatively common feature in Canadian contracts. An exclusion clause allows a party to either exclude its liability or to limit the extent of such liability. In essence, exclusion clauses allow parties to an agreement to apportion risk with greater certainty. In some cases, an exclusion clause can even exempt a party from liability for negligence, but a party's liability arising from fraud cannot be excluded.
For an exclusion clause to be enforceable, it is important that:
The party benefitting from the clause provides the other party with sufficient notice of the clause.
The act or event for which one party is seeking protection under the clause be contemplated by the clause.
The party claiming protection under the clause be able to invoke it.
While exclusion clauses tend to be interpreted strictly by courts, the Supreme Court of Canada (SCC) has indicated that these clauses are to be interpreted along the same lines as any other contractual provision.
However, there are some important principles governing the interpretation of exclusion clauses. First, the SCC in Tercon Contractors Ltd v British Columbia (Transportation and Highways) (2010 SCC 4,  1 SCR 69 at paras 122-123) set out a new test to be applied where a plaintiff is seeking to avoid the implications of an exclusion clause. The SCC laid out the test as follows:
The first issue to consider is whether the exclusion clause applies to the circumstances established in evidence.
If the exclusion clause applies, the second issue is whether the exclusion clause was unconscionable at the time the contract was made, "as might arise from situations of unequal bargaining power between the parties".
If the exclusion clause is found to be valid and applicable, a court can refuse to enforce it on the ground of an overriding public policy concern.
Second, the interpretation of exclusion clauses is subject to the doctrine of contra proferentem, under which any ambiguities in a contractual provision must be resolved against the party that benefits from the operation of the term.
Third, the interpretation of exclusion clauses seeking to exclude or limit liability for negligence is subject to a separate analysis.
In light of these principles of interpretation, it is important that exclusion clauses be drafted in clear and unambiguous language. An exclusion clause should clearly identify:
The types or heads of liability to be excluded.
Any exclusions or limits on damages.
Which parties are entitled to the benefit of the exclusion clause.
Which parties agreed to limit their rights under the contract.
Lastly, in some provinces, there is legislation that prohibits the exclusion of terms that would otherwise apply under the Sale of Goods Act. In general, these laws seek to protect individuals purchasing retail or consumer items for final use and consumption.
Choice of law
Canadian courts generally accept the system of law chosen by the parties to a contractual arrangement. Generally, courts recognise the law chosen by the parties where the choice is not made in bad faith or contrary to applicable laws, and where there are no grounds for refusing the choice of law on grounds of public policy.
If contracting parties do not make a choice of law, the United Nations Convention on Contracts for the International Sale of Goods (CISG) may apply, either by default or as a result of conflict of laws rules. The CISG will apply where one of the following applies:
Both parties are located in states that are contracting parties to the CISG.
Conflict of laws rules lead to the application of the law of a CISG contracting state.
The parties choose to apply the CISG, regardless of whether they are located in a contracting state. If contracting parties do not wish the CISG to apply by default, their contract must expressly exclude the applicability of the CISG.
Canada's International Sale of Goods Contracts Convention Act 1992 provides that the CISG has force of law in Canada. The CISG was incorporated into legislation by all Canadian provinces and territories. In Ontario, the CISG was implemented under the International Sale of Goods Act, which reflects all provisions of the CISG.
Choice of jurisdiction
The Supreme Court of Canada (SCC) noted in ZI Pompey Industrie v ECU-Line NV (2003 SCC 27, 2003 CSC 27) that foreign jurisdiction clauses "are generally to be encouraged by the courts as they create certainty and security in transaction, derivatives of order and fairness, which are critical components of private international law". In considering whether to recognise a choice of foreign jurisdiction, the SCC has indicated that the "strong cause" test initially laid out in "Eleftheria" (The) (Cargo Owners) v "Eleftheria" (The),  1 Lloyd's Rep 237 (Eng PDA), should be applied. According to the SCC, the "strong cause" test places the burden on the claimant to demonstrate to the court that there is good reason that it should not be bound by the foreign jurisdiction clause.
In determining whether to exercise their jurisdiction, courts in Canada will consider the following non-exhaustive list of factors (Van Breda v Village Resorts Ltd, 2012 SCC 17, 1 SCR 572):
The comparative convenience and expense for the parties to the proceeding and for their witnesses of litigating in the court or any alternative forum.
The law that applies to issues in the proceeding.
The desirability of avoiding multiple legal proceedings.
The desirability of avoiding conflicting decisions in different courts.
The enforcement of an eventual judgment.
The fair and efficient working of the Canadian legal system as a whole.
Arbitration clauses are commonly included in sale of goods contracts, specifically in international agreements. Unless the parties agreed otherwise, arbitration agreements within a given province or between provinces, with the exception of Québec, are governed by provincial domestic acts, while foreign awards are dealt with under provincial international acts.
Local courts generally recognise and enforce arbitration awards. Many domestic provincial laws contain similar provisions under which courts must give a judgment enforcing an award made in the province, unless certain enumerated exceptions apply. Where a party seeks to enforce an arbitral award made in another province, one additional exception applies, namely that the subject matter of the award is not capable of being the subject of arbitration under the law of the province in which the party is seeking to enforce the award.
Canada became party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) in 1986, and all of the provinces and territories, with the exception of Ontario and Québec, have enacted legislation bringing it into law. The United Nations Commission on International Trade Law's (UNCITRAL) Model Law has also been incorporated into Canadian law, both at the federal and provincial levels. The New York Convention and the UNCITRAL Model Law both govern the enforcement of international awards.
Storage of goods
Warehouse receipts are recognised and governed by provincial Warehouse Receipt Acts in most Canadian jurisdictions, and can be negotiable or non-negotiable documents of title. Negotiable receipts provide that the goods in storage must be delivered to the party who holds the receipt or to another named party, while non-negotiable receipts must be delivered to the holder of the receipt only.
Warehouse receipts generally apply to the storage of most classes of goods, subject to exceptions set out in the Warehouse Receipt Acts. It is necessary to examine the definition of the term "goods" in the relevant provincial Act to determine whether the legislation applies.
There are a number of elements set out in provincial legislation that must be included in a warehouse receipt, such as:
The address of the warehouse where the goods are to be stored.
A description of the goods.
The signature of the storer.
The date of issue of the receipt.
If these particulars are not included, this does not render the receipt void, but the storer can be held responsible for any damage occurring as a result.
The warehouse receipt is deemed to be a binding contract of bailment between the party delivering the goods and the storer, on issuance of the receipt. However, the party delivering the goods has the option of repudiating the agreement in writing within 20 days of the issuance of the receipt, and must remove the goods from the warehouse at this time.
A receipt that is intended to be non-negotiable must be clearly described as such on the receipt itself. If the issuer of the receipt does not mark the document, the storer will be subject to the liabilities of a negotiable receipt. Any terms included in a negotiable receipt that purport to limit its negotiability are automatically void.
Only one receipt can be issued for a given set of goods, unless the original receipt has been destroyed or misplaced. If a receipt is replaced, the new receipt must be clearly described as such, and if a storer fails to properly mark the duplicate receipt, he or she may be held responsible for any damage occurring as a result.
If a storer does not comply with the terms of the receipt regarding the return of the goods, subject to specific requirements set out in the provincial Acts, the storer will have to demonstrate that he or she had a lawful excuse for breaching the agreement.
British Columbia has enacted legislation that provides for the establishment of liens for parties repairing goods in their care. Ontario has gone one step further in enacting the Repair and Storage Liens Act, which allows for the creation of a lien over goods held in storage. These liens are also considered in the Warehouse Receipts Act, and permit the party storing the goods to refuse to release them until the bearer of the receipt has paid any amounts owed.
Unless charges are specifically set out in the original receipt, a lien will only apply to a negotiable receipt if this is added to the terms of the receipt after the document has been issued. In Ontario, a storer who repairs goods can also claim a lien for the repair if there was an agreement that the person repairing the goods would be entitled to remuneration.
Warehouse receipts and bills of lading can also be used as collateral security for debts owed at the date of issuance of the receipt or bill of lading.
The Canada Border Services Agency (CBSA) is the principal authority responsible for enforcing customs laws and regulations in Canada. The CBSA was established under the Canada Border Services Agency Act, which sets out the primary responsibilities, duties and powers of the CBSA. Generally, the CBSA is charged with "providing integrated border services that support national security and public safety priorities and facilitate the free flow of persons and goods, including animals and plants, that meet all requirements under the program legislation".
Section 99(1) of the Customs Act grants the CBSA the authority to select certain shipments being imported into Canada for examination. The CBSA can select a shipment for examination for a number of reasons, including:
To identify certain prohibited or restricted goods (for example, narcotics, pornography) or smuggled goods.
To satisfy the requirements of other governmental bodies (for example, food or meat inspections, import permits, and so on).
To confirm that the goods meet and satisfy customs laws and regulations.
The website of the CBSA provides more information regarding the importation of goods in Canada (www.cbsa-asfc.gc.ca/comm-eng.html).
Under the Administrative Monetary Penalty System (AMPS), the CBSA is also authorised to issue civil monetary penalties in connection with violations of the Customs Act, Customs Tariff, other government department legislation administered by the CBSA, and any regulations made under legislation it administers. Penalties under the AMPS largely serve as a deterrence mechanism for the enforcement of trade and border legislation in Canada, and, to a large extent, replace the use of seizure and ascertained forfeitures. Penalties imposed by the CBSA are typically based on the nature and regularity of the violation and, in most cases, are graduated. Penalty records are retained for three years in most cases. However, the issuance of a penalty in accordance with the AMPS, or the seizure or ascertained forfeiture of goods, does not prevent the CBSA from pursuing criminal prosecutions where appropriate, particularly in cases of fraud.
For more information regarding the AMPS, see the CBSA's Administrative Monetary Penalty System - Memorandum D22-1-1 (www.cbsa-asfc.gc.ca/publications/dm-md/d22/d22-1-1-eng.pdf).
Import duties, tariffs and rates
General tariffs and rates
Canada has implemented the Harmonized System in the Customs Tariff. There are numerous tariff treatments and ad valorem rates of customs duties within the Schedule to the Customs Tariff. Customs duties must comply with Canada's WTO bound tariff commitments and have been selectively adjusted downward or eliminated in recent years as a matter of industrial policy and implementation of various free trade agreements (FTAs).
In Canada, customs duty rates are applied in accordance with the Customs Tariff Schedule. The duty to be applied is calculated on an ad valorem basis (with modification for tariff rate quotas for certain agricultural imports). The duty rates are determined on the basis of the tariff classification number associated with the goods being imported and any applicable preferential tariff rates derived from FTA commitments and other market access commitments. The various duty rates applied to goods are listed in the Schedule to the Customs Tariff.
The Schedule to the Customs Tariff provides the various tariff treatments. While there is a growing number of tariff treatments available that reflect the recent implementation of FTAs, some of the most common preferential tariffs include the:
Most-favoured nation (MFN) tariff.
General preferential tariff (GPT).
Least developed country tariff (LDCT).
Goods imported into Canada that originate from the North American Free Trade Agreement (NAFTA) region are duty free, with the exception of certain agricultural goods subject to tariff rate quotas.
The MFN tariff is the most common preferential tariff. It applies to goods originating from all countries other than North Korea. Goods originating from countries that have FTAs with Canada may or may not use the MFN tariff preference, or more specific FTA tariff preferences, depending on evidence of origin and applicable duty rates, if different.
The GPT was introduced in 1974 to provide developing economies with greater access to the Canadian marketplace by providing beneficiary countries with duty rates lower than those under the MFN tariff. To qualify for GPT treatment, a maximum of 40% of the ex-factory price of the good(s) to be exported to Canada can originate outside a GPT beneficiary (or beneficiaries) or Canada. The GPT tariff preference is not available for all goods imported into Canada. On 1 January 2015, Canada controversially passed legislation that eliminated the availability of the GPT preference for 72 countries, including China.
The LDCT was adopted in 2003 and is designed to provide least developed economies with enhanced export access to Canada. To qualify under the LDCT, a maximum of 60% of the ex-factory price of the goods destined for Canada can originate outside an LDCT beneficiary or Canada. All countries entitled to the LDCT treatment under the Customs Tariff are also beneficiaries under the GPT, and producers/exporters in LDCT designated countries can use limited GPT originating inputs and still qualify for the LDCT.
The specific eligibility and origin rules under the GPT and LDCT are set out in the General Preferential Tariff and Least Developed Country Tariff Rules of Origin Regulations. The Regulations can be found at: http://laws-lois.justice.gc.ca/eng/regulations/SOR-2013-165/FullText.html.
Non-tariff barriers to imports
The importation of goods into Canada is subject to a number of important non-tariff barriers, including:
Marking regulations and requirements.
Certain internal barriers to trade.
Import controls in Canada are applied in accordance with the Export and Import Permits Act (EIPA) and are administered by Global Affairs Canada (GAC). Persons seeking to import goods into Canada should be familiar with these requirements in order to determine whether the goods they wish to import are subject to specific controls. In general, import controls include:
Quotas that limit the amount or quantity of goods that can be imported.
Import licensing permits.
Prohibited goods are listed in Annex VII to the Customs Tariff and include items such as pornography and hate literature, as well as goods that the GAC bars from entry in accordance with international sanctions.
In addition, the importation of certain goods into Canada is only allowed under an import permit. Under the EIPA, Canada controls imports of:
Military goods and firearms.
Toxic chemicals covered by the Chemical Weapons Convention.
Barley and associated products.
Supply-managed farm products (dairy, poultry and eggs).
Textiles and clothing.
The entire list of controlled imports can be found on the Import Control List under the EIPA. Import permits are issued by the GAC in accordance with the Import Permit Regulations. In particular, import permits are issued according to import allocations or other import authorisations, such that quantities permitted to be imported are deducted from the overall authorisation balance.
The importation of certain goods into Canada is also subject to certain marking requirements under the Marking of Imported Goods Regulations. The purpose of marking requirements is to clearly indicate the country of origin of goods. While the foreign exporter or producer usually applies the country of origin marking, Canadian importers are responsible for ensuring that the imported goods comply with and satisfy the marking requirements at the time the goods are imported. To determine which goods are subject to marking requirements, importers should consult the:
Determination of Country of Origin for the Purpose of Marking Goods (NAFTA Countries) Regulations.
Determination of Country of Origin for the Purpose of Marking Goods (Non-NAFTA Countries) Regulations.
CBSA's Marking of Imported Goods–Memorandum D11-3-1 (www.cbsa-asfc.gc.ca/publications/dm-md/d11/d11-3-1-eng.pdf).
Importers in Canada should be aware of certain internal barriers to trade that exist among the provinces and territories of Canada. These barriers exist in regards to agricultural and agri-food products, labour mobility, government procurement, and some service industries. In an attempt to eliminate some of these internal barriers, Canada introduced the Agreement on Internal Trade (AIT) in 1995. The AIT seeks to reduce and remove barriers to the inter-provincial and inter-territorial flow of goods and services. However, the AIT has achieved marginal success since coming into force. More recently, the provinces of British Columbia, Alberta, and Saskatchewan entered into the New West Partnership Trade Agreement (NWPTA). The NWPTA came into effect on 1 July 2010, and was fully implemented on 1 July 2013. The NWPTA seeks to recognise and harmonise rules governing investment, trade, and labour mobility in an attempt to remove and limit barriers to the flow of goods, services, labour and investment.
In Canada, importers can challenge or request a re-determination of customs decisions through a system of administrative appeals. These challenges can be further appealed to the Canadian International Trade Tribunal (CITT), the Federal Court, or a provincial court of jurisdiction in limited circumstances.
An importer or its representative can request a re-determination of decisions made by the Canada Border Services Agency (CBSA) in respect of tariff classification, origin, value for duty or marking (section 60, Customs Act). To challenge a decision of the CBSA, an importer or its representative must submit the request for re-determination within 90 days of the date of the initial decision, or in the case of importer self-adjustments from deemed determinations, within 90 days of having reason to believe that customs declarations were erroneous. Requests for a re-determination must be addressed to the Appeals Division at any customs office in Canada. Following the request, an appeals officer will make a decision on behalf of the President of the CBSA.
Decisions made by the President of the CBSA can be further appealed under the Customs Act. Where the appeal concerns tariff classification, origin, or customs valuation, the appeal must be made to the CITT. Notice of such appeals must be filed in writing to the President and the Secretary of the CITT within 90 days of the decision of the President of the CBSA, and any applicable customs duties as determined by the CBSA must be paid in advance of the appeal. Decisions of the CITT can be further appealed on questions of law to the Federal Court of Appeal, provided that these appeals are filed within 90 days of the CITT's decision.
Where the appeal concerns or relates to obscenity, child pornography or hate propaganda, appeals must be brought before the provincial court of jurisdiction. These appeals must be in writing and must be submitted to the President and the clerk of the provincial court within 90 days of the President's decision. An importer or its representative can appeal a decision of a provincial court of jurisdiction on questions of law to a higher court.
As a WTO member, Canada has implemented relevant WTO trade remedy agreements through domestic legislation. These domestic laws address trade remedy issues such as anti-dumping, subsidies, countervailing measures and safeguards. While Canada's legal framework for trade remedies generally reflects WTO norms, it may not be fully compliant with recent WTO jurisprudence on trade remedies obligations and measures (for example, Canada has refused to amend its practices and to implement the reasoning in DS 379 with respect to countervailing measures).
The domestic legislation for anti-dumping and countervailing measures are the:
Special Import Measures Act (SIMA).
Special Import Measures Regulations (SIMR).
SIMA and SIMR are jointly administered by the Canada Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT).
The legislative basis for safeguard measures in Canada, both global and emergency, is the Customs Tariff. In addition, safeguard inquiries are governed by the Canadian International Trade Tribunal Act (CITT Act). Safeguard measures can be applied in the form of tariffs under the Customs Tariff or the Export and Import Permits Act. Safeguard inquiries are conducted entirely by the CITT.
Canada anti-bribery and corruption legislation include:
The Corruption of Foreign Public Officials Act.
Provisions in the Criminal Code, for domestic bribery.
Competition law is primarily regulated through the Competition Act.
Investigations into dumping and subsidies proceed as follows:
The CBSA has responsibility for determining whether dumping/subsidisation has occurred.
The CITT has exclusive jurisdiction to determine whether or not dumping/subsidisation is a cause, or threatens to be a cause, of injury or retardation to a domestic industry of like goods.
Trade remedies are justified only when both elements are present.
CBSA. To gather information, the CBSA will send requests for information to all known exporters and importers. Canadian trade remedy investigations are governed by strict and short statutory deadlines for both parties and the CBSA. Once an investigation is initiated, importers and exporters generally have between 25 to 37 days to respond to detailed CBSA requests for information. The requests for information encompass production, sales, logistics, and cost accounting information. Extensions to these statutory requirements are difficult to obtain. The CBSA will also conduct on-site investigations to verify the information provided.
Regarding enforcement, the CBSA enforces provisional duties from the date of any preliminary determination of either dumping or subsidisation. The provisional period lasts for four months and duties are calculated based on margins of dumping calculated as a percentage of export prices for specific exporters. Importers are responsible for payment of provisional duties, which may be refunded in whole or in part in the event of lower margins of dumping determined in the CBSA's final determination of dumping and/or subsidisation, or if a no injury or no past injury finding is made by the CITT. In the event of an injury finding by the CITT, the CBSA will recalculate provisional duties within six months of the injury finding.
Once an injury finding is made, the CBSA uses a prospective system of trade remedy duty enforcement. Importers are responsible for:
Self-assessing duties in conformity with the injury finding and the final determination of margins of dumping (or normal values).
Payment of anti-dumping duties where export prices are below normal values.
Countervailing duties are assessed at the time of importation in conformity with any amounts of subsidy determined in the investigation. The CBSA conducts periodic administrative reviews of normal values, export prices and amounts of subsidies and will enforce new normal values, export prices, and amounts of subsidy from the date of any such administrative review determination (except in limited cases where they can be re-assessed retroactively).
The SIMA provides an administrative appeal process under which importers can seek re-determinations of normal values, export prices and countervailing duties. These appeals must be made within 90 days of the initial determination of anti-dumping or countervailing duties, which are deemed determinations based on information provided by the importer. Re-determination decisions must be made within one year from the date of the request for re-determination. A re-determination decision can be appealed by an importer within 90 days to the CITT, and the CITT's decision can be appealed to the Federal Court of Appeal on a question of law.
CITT. Similarly, the CITT will request that a questionnaire be completed by domestic producers, importers, foreign producers or exporters, trading companies, and even foreign governments (in subsidies cases). The CITT also conducts an oral hearing on the question of injury. Once the CITT has made its final determination of injury, the matter reverts to the CBSA, which is responsible for provisional and final duty enforcement, as outlined above.
For safeguard inquiries, the CITT has investigatory authority to determine if goods are imported in such increased quantities and under such conditions so as to be a principal cause or threat of serious injury to domestic producers of like or directly competitive goods. To gather information, the CITT will request that a questionnaire be completed by domestic and foreign producers, importers and exporters. An oral hearing will also be conducted by the CITT. Following the CITT's affirmative determination, the Government of Canada may choose to apply safeguard measures to prevent or remedy the injury (or threat of injury) to domestic producers.
Investigations and enforcement
Anti-dumping and countervailing duty investigations
For anti-dumping or countervailing duty cases, the President of the Canada Border Services Agency (CBSA) initiates an investigation either on his own initiative or on the basis of a written complaint by domestic producers. Most commonly, an investigation is initiated on the basis of a complaint. The President will initiate an investigation if the following conditions are met:
It is supported by domestic producers whose production represents more than 50% of the total production of like goods of those domestic producers who expressly either support or oppose the complaint.
The production of the domestic producers who support the complaint must represent at least 25% of the total production of like goods by the domestic industry.
On receiving a written complaint, the President will determine whether it is properly documented. This means that the complaint must contain evidence of dumping, subsidisation (or both), and material injury in the form of lost sales, price erosion, price suppression or retardation of domestic production resulting from dumping/subsidisation. Once the CBSA decides to investigate the question of whether dumping or subsidisation occurred, it publishes notice of the investigation in the Canada Gazette, and the CBSA and the Canadian International Trade Tribunal (CITT) start parallel but separate proceedings to investigate the question of injury.
Investigations involve preliminary and final decisions by both the CBSA and the CITT, with regard to their respective mandates. For an investigation to continue:
The CITT must make a preliminary decision of injury within 60 days of the date of initiation of an anti-dumping or countervailing duty investigation.
The CBSA must make a preliminary decision of dumping or subsidising within 90 days (or exceptionally within 135 days).
The CITT can preliminarily determine that a complaint does not meet a prima facie evidentiary threshold and terminate an investigation that does not sufficiently disclose injury. The CBSA can terminate an investigation in totality or against a named country or countries if dumping or subsidisation cannot be preliminarily established. However, these determinations are rare because the CBSA uses estimates for its preliminary determinations, preferring to reserve the establishment of a proper evidentiary foundation for dumping or subsidisation until the final determination stage of its investigations.
The process for commencing safeguard inquiries is similar. The CITT can initiate a safeguard inquiry either on direct referral from the government or on receiving a written complaint. To have standing, the complainant must be a domestic producer of goods that are like or directly competitive with goods being imported into Canada, or any person or association acting on behalf of such domestic producer. The written complaint must include certain information prescribed by the CITT Act and the CITT Rules.
On receiving the complaint, the CITT determines whether the complaint has been properly documented, and if so, whether a safeguard inquiry is warranted. The CITT will initiate a safeguard inquiry only if it is satisfied that:
There is a reasonable indication of serious injury.
The complainant has standing.
There have been no recent similar cases in the past two years.
After conducting its inquiry, the CITT makes a recommendation to the Minister of Finance, who then decides whether to impose the safeguard measures recommended by the CITT, or whether other measures are more appropriate.
Depending on the stage of the investigation process, parties to these proceedings (including foreign parties) can make representations in writing and appear before the CITT at an oral hearing.
The Canada Border Services Agency's (CBSA) final determination of dumping and subsidisation can be judicially reviewed by the Federal Court of Appeal or by a NAFTA panel (in the case of NAFTA parties), although the success rate of these reviews is low. Final determinations of dumping or subsidisation can only be set aside if the CBSA exceeded its jurisdiction, erred in law, violated a principle of natural justice, or made material errors in findings of fact tantamount to errors of law. However, other than for jurisdictional errors, the Federal Court and NAFTA panels tend to show significant deference to CBSA's decisions. In addition, preliminary determinations of dumping/subsidisation cannot be judicially reviewed, since they are not final decisions.
The Canadian International Trade Tribunal's (CITT) final decision on injury is conclusive, and is reviewable only by the Federal Court of Appeal or by a NAFTA panel (in the case of NAFTA parties). CITT's decisions are rarely overturned, and can only be set aside if the CITT exceeded its jurisdiction, erred in law, violated a principle of natural justice, or made material errors in findings of fact tantamount to errors of law. If a CITT decision is set aside, the matter is typically sent back to the CITT to be reconsidered, although there are other remedies available to the Federal Court of Appeal.
To commence judicial review proceedings against decisions of the CBSA or CITT, a party must submit a notice of application to the relevant court. The Federal Court Rules contain:
Requirements for service and filing of supporting documentation.
Procedural and substantive requirements relating to the Court's judicial review and remedies.
Under Part V of the Customs Act and the Reporting of Exported Goods Regulations, goods exported from Canada must be reported to the Canada Border Services Agency (CBSA). If the goods are valued at Can$2,000 or more and the final destination is a country other than the US, Puerto Rico or the US Virgin Islands, exportations must generally be reported. Goods regulated or controlled under Canadian legislation must also be reported.
The export documents that must be submitted to the CBSA vary depending on the country of export and the type of goods. These documents may include an export declaration, an export permit if the goods are controlled, and documents required by other agencies or departments of the Government of Canada. The applicable reporting requirements are determined on a case-by-case basis.
Canada maintains export controls under the Export and Import Permits Act (EIPA) on specific goods and technology listed on the Export Control List (ECL), as well as comprehensive controls on exports to countries on the Area Control List (ACL).
Permission under the EIPA is administered by Global affairs Canada (GAC), whereas enforcement is managed by the Canada Border Services Agency (CBSA) and the Royal Canadian Mounted Police.
The Export Controls Handbook lists the countries subject to export controls under the EIPA, as well as the ECL and ACL. The Handbook is available on the GAC website (www.international.gc.ca/controls-controles/military-militaires/handbook-manuel.aspx?lang=eng&menu_id=78&view=d).
Only North Korea and Belarus are currently on the ACL, and the Government of Canada has announced that Belarus will be de-listed imminently. Permits are required for the export or transfer of goods and technology on the ECL or to ACL countries. In the case of the ECL, there are exceptions or general permits available for exports or transfers to certain countries, including the US. Export permits under the EIPA are administered by the Export Controls Division of GAC.
Many of the goods and technologies listed on the ECL are those covered by:
The Wassenaar Arrangement, in which Canada participates.
Other international commitments of Canada concerning non-proliferation and weapons of mass destruction.
The ECL also covers "dual-use" items (that is, items that can be used for both civilian and military purposes), including goods and technology relating to:
Dual-use items are subject to export controls even if they are not being exported for military purposes.
The ECL also lists:
Certain food products (such as peanut butter and sugar-containing products) on which Canada administers export quotas.
Logs and softwood lumber to give effect to Canada's commitments under the Softwood Lumber Agreement with the US.
In addition, raw logs and unprocessed fish may be subject to provincial export controls.
Various other federal departments and agencies also impose controls on the exportation of certain items (including Agriculture and Agri-Food Canada, the Canadian Nuclear Safety Commission, Canadian Heritage, the Canadian Food Inspection Agency, Environment Canada, Health Canada, the National Energy Board and Natural Resources Canada). Additional permits may be required to export these items.
Detailed information on Canada's export controls regime is available at: www.international.gc.ca/controls-controles/about-a_propos/expor/before-avant.aspx?lang=eng.
Under the Export and Import Permits Act (EIPA), penalties for exporting controlled goods without a permit can be significant. Less severe violations can result in a fine, for each illegal export, of up to Can$25,000 or imprisonment for up to 12 months, or both. In more severe cases, there is no prescribed limit on the fine (the amount is left to the court's discretion), while individuals can face imprisonment for up to ten years and can also be fined. If the offence is committed by a company, any officer or director who directed, authorised, assented to, acquiesced in or participated in the commission of the offence can be personally liable.
Under the Customs Act, administrative monetary penalties (AMPs) can also be imposed for failing to report or falsely reporting goods subject to export controls. The applicable AMPs are:
Can$2,000 for a first violation.
Can$4,000 for a second violation.
Can$8,000 for third and subsequent violations.
As these penalties apply per shipment or occurrence, they may add up quickly; AMPs in excess of Can$1 million have been levied on individual exporters.
International trade restrictions
Canada currently maintains economic sanctions or related measures in respect of 21 countries:
Belarus (see below).
Central African Republic.
Democratic Republic of Congo.
In many cases, the restrictions consist of asset freezes on designated persons (individuals or entities) and prohibitions on the sales of arms or other military goods. Sanctions may go further in certain cases (such as Russia and Iran) and are extensive in the case of North Korea, Syria and Russia-controlled Crimea. Canada maintains controls on exports of all goods to Belarus and North Korea under the Export and Import Permits Act (see Question 38) However, the Canadian Government announced that these controls will be lifted in the case of Belarus.
Most of Canada's sanctions are maintained by regulations made under either the:
United Nations Act (UN Act), which gives effect to UN Security Council resolutions.
Special Economic Measures Act (SEMA), under which the Government of Canada can adopt unilateral sanctions to address what it considers to be grave breaches of international peace and security.
Additionally, Canada can target countries for export restrictions by placing them on the Area Control List (see Question 38). Canada also imposes asset freezes and restricts financial dealings with officials or former officials of certain foreign governments under the Freezing Assets of Corrupt Foreign Officials Act.
The Canada Border Services Agency (CBSA) and the Royal Canadian Mounted Police enforce Canadian sanctions. The Economic Law Section of Global Affairs Canada (GAC) administers applications for permits to engage in activities or transactions prohibited under the UN Act or the SEMA. Permits are issued at the discretion of the Minister of Foreign Affairs.
Penalties for violations of the United Nations Act can result in fines of up to Can$100,000 and imprisonment of up to ten years. Violations of the Special Economic Measures Act can result in fines of up to Can$25,000 and imprisonment of up to five years.
The penalties for non-compliance with restrictions under the Export and Import Permits Act are described in Question 39.
Canada's economic sanctions legislation imposes general disclosure requirements on all persons, including businesses, who possess or control property owned or controlled, directly or indirectly, by a designated person or by an entity owned or controlled by a designated person. In addition, financial institutions (including banks, insurance companies and securities dealers) face specific requirements to determine on a continuing basis whether they are in the possession of property belonging to designated persons who have been targeted by sanctions. Federally regulated financial institutions (FRFIs) have additional obligations to file monthly reports with the Office of the Superintendent of Financial Institutions (OSFI) about frozen assets within their possession. OSFI expects FRFIs to have compliance policies that address economic sanctions legislation.
Businesses can take various practical steps to ensure compliance, including:
Developing compliance policies and practices tailored to their risks.
Assigning clear compliance responsibilities, including for risk assessment and screening and approving transactions.
Training managers and employees in their compliance responsibilities.
Engaging in sound record-keeping.
Conducting periodic internal compliance audits.
Foreign trade barriers
There is no formal procedure for either making complaints against foreign trade barriers or investigating complaints that are made. Complaints are handled by the Trade Policy and Negotiations Branch of Global Affairs Canada (GAC), which will investigate them on its own or together with other departments or agencies with appropriate sectoral expertise. Trade barriers can be reported by e-mail to email@example.com. In addition, it is recommended to directly contact officials in the Trade Policy and Negotiations Branch or those in the Trade Commissioner Service with responsibility for the country or territory maintaining the barrier.
In deciding on an appropriate response, in addition to the substantive merits of the complaint, the evidence to support it and the practical remedies available to address it, officials are likely to weigh factors such as:
The economic and political sensitivity of the barrier.
The extent to which the barrier is a concern for other Canadian businesses.
Whether Canada imposes similar barriers.
Canada's broader political relations with the foreign country or territory.
* The authors would like to thank the following students for their contributions to this article: Daniel Cipollone, Faiz Lalani, Jonathan Cheng, Hartlee Zucker, Eric Choi, Kristen Holman, Jason Berall and Marlee Brillinger.
The regulatory authorities
Global Affairs Canada (GAC)
Principal responsibilities. GAC administers export and import controls and economic sanctions, and negotiates market access with other governments.
Canada Border Services Agency (CBSA)
Principal responsibilities. The CBSA provides services for goods and persons, including customs, excise, commodity, and other taxes and duties.
Department of Finance Canada
Principal responsibilities. The Department of Finance is responsible for tariff relief, laws governing trade remedies, and supports GAC in market access negotiations and agreements.
Principal responsibilities. Industry Canada is responsible for internal trade (Agreement on Internal Trade), foreign investment review, the promotion of corporate social responsibility and trade statistics.
Canadian International Trade Tribunal (CITT)
Principal responsibilities. The CIIT is responsible for conducting trade remedy inquiries, public procurement, challenging customs and excise tax appeals, and trade policy references.
Global Affairs Canada (GAC)
Description. This is the official federal government website for GAC, which includes text of free trade agreements, import and export guides and tariff information, and is updated regularly.
World Trade Organization (Canada)
Description. This page on the official WTO website gathers key information on Canada's participation in the WTO.
Justice Laws website
Description. This is the official government website for all federal consolidated acts and regulations in Canada, and it is updated bi-weekly.
Judgments of the Supreme Court of Canada (SCC)
Description. This is the official website for all SCC judgments, maintained by Lexum, and is updated regularly.
The Canadian Legal Information Institute
Description. This unofficial website provides free access to court judgments, tribunal decisions, statutes and regulations from all Canadian jurisdictions.
The Civil Code of Québec
Description. This is the official English language translation of the Civil Code of Québec.
Description. The e-Laws website provides online access to official copies of Ontario's statutes and regulations, and is updated regularly.
Description. Official English version of the provincial government website for all of Québec's laws and regulations, updated regularly.
Canada Border Services Agency (CBSA)
Description. This is the official website for the CBSA, which includes information on customs laws and regulations and dispute resolution, as well as information for importers and exporters.
New West Partnership Trade Agreement
Description. This is the official website for information on the New West Partnership Trade Agreement between British Columbia, Alberta and Saskatchewan, which creates Canada's largest, barrier-free, inter-provincial market.
Canadian International Trade Tribunal (CITT)
Description. This is the official website of the CITT, which is the main quasi-judicial institution in Canada's trade remedies system. This website also provides links to cases heard before the CITT.
Jesse I Goldman, Partner
Professional qualifications. Canada, Ontario Bar, 1996
Areas of practice. Canadian and international trade law, including trade remedies, NAFTA and WTO matters, customs compliance and structuring; investment and cross-border transactions; trade and border security; product regulatory issues; commodity taxation; founding member of Bennett Jones LLP China practice.
Non-professional qualifications. BA (Hons., Political Science), Carleton University, 1990; LLB, University of Manitoba, 1994
- Counsel in numerous leading international trade and customs cases litigated before all levels of Canadian courts and administrative tribunals, as well as before NAFTA Binational Panels.
- Counsel of record in over 90 trade remedy matters with a focus in recent years on trade remedy litigation involving China.
- Providing strategic advice to clients designed to maximise their commercial opportunities from international trade and investment.
- Representing clients in a wide range of sectors, including manufacturers of industrial and consumer products, energy, aviation, automotive, pharmaceuticals and agriculture.
Languages. English, French
- Canadian Bar Association (CBA).
- International Bar Association.
- Business and Industry Advisory Committee (BIAC), Member, China Task Force.
- International Chamber of Commerce (ICC), delegate, Customs and Trade Facilitation.
- Vice-Chair of the International Trade Committee of the Inter-Pacific Bar Association (IPBA) for a two-year term beginning in 2014.
- Lectures to industry and professional associations throughout Canada, the US and China.
- Frequent contributor to international trade and international business publications.
- Recognised in Chambers Global: The World's Leading Lawyers for Business as a leading lawyer in International Trade/WTO, and Who's Who Legal: Canada 2010-2014 as a leading lawyer in Trade & Customs.
Eden M Oliver, Partner
Professional qualifications. Canada, Alberta Bar, 1985; Canada, Ontario Bar, 1992
Areas of practice. International and domestic corporate and commercial transactions; joint ventures; mergers and acquisitions; financing and restructuring; representing public and private enterprises, financial institutions, lenders and investors, with a focus on transactional and advisory work and related regulatory issues in the mining and energy industries.
Non-professional qualifications. BA with highest honours, Victoria College, University of Toronto, 1981; LLB, Osgoode Hall Law School, 1984
- Program Co-Director of Osgoode Hall's Certificate in Mining Law (five-day programme, 2012-2014).
- Trustee of the International Program Co‐Chair for the 2014 Annual Institute, and Regional Program Chair, Rocky Mountain Mineral Law Foundation.
- Member of the Securities Committee of the Prospectors and Developers Association.
- Secretary of CIMVal and Member of the Canadian Institute of Mining, Metallurgy & Petroleum.
- Member of the American Bar Association Section on Environment, Energy and Resources.
- Member of the International Bar Association. Served on the Steering Committee to host the International Bar Association Section on Energy, Environment, Natural Resources and Infrastructure Law in 2010.
- Former Chair of the Natural Resources and Energy Section of the Ontario Bar Association.
- Chair of the Board of Governors of Havergal College (2010-2012) and board member (2006-2013).
Matthew Kronby, Partner
Professional qualifications. Canada, Ontario Bar, 1990; US, New York Bar, 2000
Areas of practice. International trade and investment, with a focus on dispute resolution under the WTO Agreement, the NAFTA and other trade and investment treaties, and export controls, economic sanctions and anti-corruption compliance.
Non-professional qualifications. BA, McGill University, 1984; LLB, University of Toronto, 1988
Legal and strategic advice to business and government clients on trade treaty compliance and dispute settlement matters.
Counsel to Canadian and international clients in export control, sanctions and foreign corrupt practices investigations.
Headed the Government of Canada's Trade Law Bureau (2009-2012) and served as manager and legal counsel in the Bureau for more than 15 years.
Extensive dispute settlement experience at the WTO, including on softwood lumber, aircraft subsidies, biotech products and automotive trade, and in investor-state arbitration under the NAFTA.
Extensive trade and investment treaty negotiations experience, including as lead counsel to the Government of Canada on the Comprehensive Economic and Trade Agreement (CETA) with the EU, free trade negotiations with Colombia, Peru and Singapore, and negotiations on improvements to the WTO's Dispute Settlement Understanding.
Adjunct Professor of International Arbitration, University of Toronto Faculty of Law.
Co-chair of the Canadian Bar Association's Public International Law Committee.
Officer of the International Bar Association's International Trade and Customs Law Committee.
Board Member, International Law Association-Canada.
Chair of the Legal Committee of Transparency International Canada.
Maureen M Ward, Partner
Professional qualifications. Canada, Ontario Bar, 2001
Areas of practice. Corporate and commercial litigation with an emphasis on fraud matters; insurance; enforcement of foreign judgment and orders.
Non-professional qualifications. BA with honours, University of Guelph, 1996; LLB, University of Windsor, 1999; Canadian Police College Integrated Financial Investigations course on Investment Fraud, 2009
- Representing both national and international clients in a broad range of matters, including commercial disputes, commercial arbitration proceedings, litigation regarding fraud, insurance, competition law matters, contract disputes, directors' and officers' liability and professional negligence.
- Appearing frequently before the Ontario Superior Court of Justice, the Ontario Court of Appeal and handling complex cross-border litigation.
- Litigation of issues regarding investment fraud, bank liability, cross-border litigation matters, insurance coverage disputes, bills of exchange, investment disputes, letters rogatory, credit card and cheque fraud, fidelity claims, civil fraud and conspiracy and bankruptcy matters.
- Acting as an independent supervising solicitor for the execution of Anton Piller orders
Professional associations/memberships. Member of the International Bar Association.
- Frequent lecturer on litigation matters, including those related to fraud recovery, at legal conferences and CLE programmes, including for the Ontario Bar Association, the Association of Certified Forensic Investigators, Ontario Police College and the Canadian Health Care Anti-Fraud Association.
- Co-author of the legal chapter of the Association of Certified Forensic Investigators of Canada Certification Manual.
- Regular contributions to Legal Alert, Carswell.