Nov 5, 2018
Osler partner Riyaz Dattu tells Canadian Lawyer that despite the United States-Mexico-Canada Agreement (USMCA) being reached, the cross-border trade landscape is still filled with uncertainty. In his Cover Story article, author Shannon Kari examines the international trade climate, including the at times contentious negotiations between Canada, the U.S. and Mexico, which eventually culminated in the USMCA (which has not been ratified yet). Riyaz, a partner in Osler’s International Trade Group who has written extensively on international trade issues, says that despite this, there are other factors at play — including the U.S. administration — that may be less predictable.
“There is still a great deal of uncertainty in the current climate,” Riyaz tells Canadian Lawyer. “There is also a need to be able to react much more quickly.”
He says that this cross-border trade uncertainty means that internal legal departments should be devoting more resources to understanding the rules that govern these issues and taking a more proactive approach.
“The federal government is well served by its in-house lawyers,” Riyaz tells Canadian Lawyer. “But the development of legal talent in this area has been lacking within Canadian businesses. The backgrounds [of in-house counsel] have traditionally been in corporate law, M&A or securities. That is short-sighted. You will always be in reactive mode.”
Riyaz stresses the importance of contingency planning to mitigate the impact of cross-border trade issues that may arise.
“While companies spend considerable time on tax planning, I do not understand why they do not put a fraction of the same effort on international trade planning,” Riyaz tells Canadian Lawyer. “The potential impact on companies can run into the millions for failing to ensure compliance with tariff classification rules and rules of origin.”
He adds: “Once you understand the [trade] rules, you can put in a mitigation strategy and deal with potential risk issues. As well, the frameworks already in place for trade agreements are still going to be the basis for how rules are likely to be interpreted. It is not as if the whole landscape will be different.”
Riyaz also says that it might be prudent for some companies to consider an increased focus in markets such as Europe, in light of the Canada-European Union Comprehensive Economic and Trade Agreement coming into force in September 2017. He says that “Canadian companies should consider alternate sourcing as a result of CETA.”
He adds: “There has not been any big impact yet, but I hope in the future there will be a move to diversify to the European market. Legal departments should have strategies to adapt to the changing trade rules.”
For more information, read author Shannon Kari’s Cover Story article “A new era of cross-border trade,” in the November 5, 2018 edition of Canadian Lawyer. Or, read the digital version of the article in Canadian Lawyer InHouse.