Opinion: Important points about point-to-point shipments
Posted: June 19, 2019 by Kim E. Stoll
Cabotage refers to the right to transport goods or passengers between two points in the same country. Cabotage laws (Customs tariffs) apply to all transportation modes including vehicles, trailers or containers that are otherwise registered in another country.
Any point-to-point moves within Canada are generally restricted to Canadian citizens or permanent residents. Any foreign-based equipment that’s owned or leased by someone in a foreign country — or begins its trip outside Canada and returns — must usually leave within 30 days of crossing the border. Foreign containers need to be exported within 365 days of being imported as well.
There are exceptions to the rules, however.
As long as those at the wheel meet immigration requirements, the foreign-based equipment can be used to make specific point-to-point moves in Canada without facing duties or taxes. These moves need to be incidental to an international trip, such as a single move for an international LTL shipment, and the route must fall entirely within our borders.
These “incidental” moves must include a route that’s consistent with the international shipment; involve a trailer or container that was empty when it came to Canada to pick up goods for exporting; include a load for export that has been picked up after delivering a domestic load; and be part of a return trip to the country of origin.
For the most part, empty foreign conveyances can be moved within Canada without any restrictions. The equipment that enters Canada to pick up pre-arranged cargo for export can complete a domestic move as long as it’s consistent with the route being used to pick up the pre-arranged export.
It means that a tractor-trailers owned and registered in the U.S. can drop off an international load in Ontario after crossing the international border, then pick up a load somewhere in Ontario to be delivered elsewhere in the province while on the way back to the U.S. Incidental moves are not allowed if the load is moving through Canada and the origin and destination are both in another country – or if the origin and destination are in Canada while part of the trip crosses the international border.
Breaching cabotage laws can result in penalties applied by the Canada Border Services Agency including detentions, duties, taxes, interest, fines and penalties under the Administrative Monetary Penalty System (AMPS), canceled Free and Secure Trade (FAST) clearance status, an end to other trusted trader privileges, seizures, and criminal liability.
Those who drive the equipment may face restrictions of their own under immigration laws.
Canada’sImmigration and Refugee Protection Regulations say a foreign driver doesn’t require a work permit if he/she is employed by a foreign company, drives foreign-owned equipment that isn’t registered in Canada, and is primarily involved in international transportation. The non-Canadian drivers who are employed by Canadian companies and who use Canadian equipment to pick up U.S.-bound loads on this side of the border will not meet the immigration requirements. They will need to apply for a work permit, and, among other requirements, no Canadians can be available to perform the job.
It all means that foreign carriers entering Canada — or Canadian carriers using foreign drivers — should review driver nationalities, work permits, the addresses on incorporation documents, equipment licences and registration, points of entry and routes, the status of prearranged export movements, and whether the trailers and containers are empty or loaded.
Canadian carriers should be careful to comply with U.S. cabotage and immigration laws as well. As is the case on this side of the border, domestic moves between two points in the U.S. have to be incidental to an international move.
Drivers should also avoid repositioning an empty trailer between two points in the U.S. unless they crossed the border with that trailer. Neither should they top up an international shipment with a U.S. domestic shipment, or solicit domestic deliveries while in the U.S.
These are all important points to consider when it comes to point-to-point moves.
— Kim E. Stoll is a partner with Fernandes Hearn LLP in Toronto, and can be reached at 416-203-9509, or by emailing email@example.com. This article is intended for information purposes only and does not constitute legal advice.