Canadian Parliament Passes USMCA, but COVID-19 Crisis May Delay Coming into Force

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On March 13, 2020, the Canadian House of Commons passed Bill C-4, An Act to implement the Agreement between Canada, the United States of America, and the United Mexican States (“Bill C-4”), the implementing legislation for the trilateral trade agreement between Canada, the United States, and Mexico (officially known as CUSMA in Canada but popularly referred to as USMCA following the American acronym). Mere hours later, the Senate agreed to accept Bill C-4 without amendment and without recorded vote. Bill C-4 was then given Royal Assent almost immediately. While it was largely a foregone conclusion that Bill C-4 would pass, the speed with which this took place reflected a desire on the part of all Canadian political parties and federal representatives to ensure that CUSMA’s implementing legislation was addressed before the extraordinary suspension of Parliament owing to the ongoing COVID-19 crisis.

The passage of Bill C-4 has been misleadingly described as “ratification” by a number of commentators and media sources. To correct this misconception, it is important to clarify what Bill C-4 does (and does not) do, how it comes into force, and what comes next.

Bill C-4 Implements CUSMA

Unlike in the United States, where treaties ratified by Congress are (in principle) domestically enforceable, in Canada treaties must be incorporated into domestic law in order to be enforceable. If domestic legislation is already consistent with the treaty obligations, separate implementing legislation may not be required. Otherwise, Parliament must pass stand-alone implementing legislation to give the treaty effect.

Bill C-4 is such implementing legislation for CUSMA. It is comprised of two parts. The first is a stand-alone implementation act which incorporates CUSMA into Canadian law. This aspect of Bill C-4 is very similar to the NAFTA Implementation Act and includes certain key provisions such as a prohibition on private persons bringing any proceedings or actions, without the consent of the Attorney General, against any person or entity for a violation of CUSMA.

The second aspect of Bill C-4 is a series of amendments to be made to other legislative schemes so as to bring them into compliance with obligations under CUSMA. For example, Bill C-4 includes a number of amendments to the Copyright Act to bring its provisions into alignment with commitments made by Canada during the CUSMA negotiations. Bill C-4 amends 24 separate acts, ranging from the Bank Act to the Broadcasting Act, to the Special Import Measures Act.

In the coming weeks, we will be providing in-depth consideration of a number of elements of CUSMA’s implementation that are likely to have a major impact on the Canada-US-Mexico relationship and trade between these three countries.

What Happens Next?

The passage of implementing legislation is distinct from ratification in Canada. The measures set out in Bill C-4, including the amendments to other legislation, do not come into force until a date to be fixed by Order in Council ratifying CUSMA.

New, implementing regulations will need to be drafted and promulgated in order for the legislative amendments made by Bill C-4 to become effective. These implementing regulations will need to be negotiated with the United States and Mexico, the other parties to CUSMA. This process is likely to take several months, at the very least, and may well be delayed more significantly given the ongoing COVID-19 crisis worldwide.

Once the implementing regulations have been agreed upon, the CUSMA parties will likely agree on a date for ratification and an Order in Council will be promulgated to authorize the ratification of the treaty.

It is unlikely that ratification will take place during the ongoing COVID-19 crisis. However, as terms of trade between the three North American partners could change rapidly during and following the crisis, businesses and other parties should follow any developments closely.

Bill C-4 has a staggered implementation

The majority of the provisions in Bill C-4 will be implemented on the date of entry into force. Certain changes will come into force on a later timeline, such those affecting the financial services sector, including amendments to the Bank Act, the Insurance Companies Act, and the Canada Deposit Insurance Corporation Act. These provisions will come into force separately within one year of Bill C-4 coming into force.

Changes excising the term “NAFTA,” wherever it appears, from Canadian customs laws and regulations also have delayed effect, coming into force six years from the date of Bill C-4 coming in force. This waiting period has likely been included as Canadian customs law establishes a six year audit period for shipments. By delaying the coming into force of these provisions, Canadian authorities will ensure the last NAFTA shipments are no longer subject to audit before the definitions those shipments relied upon are removed from Canada’s customs legislation.

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