Travels in Canada — 2017: The Year of the “Big Mess”

Shipping an FDA regulated product into the US? Here is what you need to know.

For decades, Canadian manufacturers of food products, medical devices, and pharmaceuticals have enjoyed almost immediate access to the world’s largest customer, the United States. Good transportation options, geographic proximity and industry reputation have given them important competitive advantages south of the border.

Readers of these alerts will know that in large part, these companies in Canada act as “importers of record” for US import purposes. This means that they assume all US import compliance and payment liabilities as if they were, de facto, US resident importers. This has been a business model that has proven successful in the past but, looking forward, these same companies will be facing new import scrutiny at the border.

Why? One acronym, ACE.

ACE = Automated Customs Environment, a US Customs and Border Protection electronic “single window” that has been in the development stage for the past many years. In 2017, ACE will be the mandatory means to file FDA import data through this CBP portal.

To be clear, this “single window” can be likened from transitioning a software program on your laptop from the second dimension to the third. In application, it can be likened more realistically as a two-way mirror given that it will give US import agencies far broader and more immediate access to a company’s import operations and supply chain.

The advantages to the import community is a one stop window to file electronically the myriad of import data to multiple import agencies simultaneously. But make no mistake, the flip side is that the FDA will not only be requiring more data, it will be using this data to enhance their ability to create import risk profiles (in the same vein as CBP currently does) and to ensure that data are exact matches to company documents, that pricing and product origin reflect company operations, and that FDA product codes are in fact reflective of their end-use purpose. And all of this data compilation and agency screening will need to take place before the FDA issues its all-important “may proceed” instruction that allows the shipment to be released into the commerce of the US marketplace.

To use another analogy, this new “single window” is like the passenger information required every time someone books a flight into the US. The information is sent to US border agencies who check their databases and if the information is accurate, the passenger is allowed to board the flight. If the information shows an adverse history, the passenger is either delayed at the airport or not allowed to board the flight he or she has booked. And now, with the information provided electronically to other US agencies, this same passenger may be singled out of the boarding line to answer additional questions, such as his or her filing of income taxes, countries visited in the past months, or proof of US destination plans. And for any reader who has booked an international flight painfully knows, even well intentioned data transmission can result in headaches and lost time. And for the business traveler, this translates into lost opportunities and profit erosion.

And why is 2017 the year of the big mess? Because many here in Washington in both government and trade community circles fear that the US agencies simply will not be operationally ready for the massive amounts of new data pouring into their databases. The FDA will need time to sync their information systems with those of CBP. And these same agencies are under their own Congressional oversight and mandatory timelines.

This data portal is certainly not the only significant change companies in Canada will be facing in 2017. Readers will have seen our alert on the Trade Facilitation and Trade Enforcement Act of 2017, which expands CBP risk assessment powers and resources, including new whistleblower opportunities in the import environment.

For many, the dark clouds may be gathering this fall. Companies may want to act now to understand the new requirements, position their internal operations to ensure that US import data is accurate, and that in-house managers or legal offices with the support from data integration gurus in their Information technology department take an active part in this new world of trade. Congress has made it clear that complacency is not an option. Political leaders have made trade enforcement a priority. And whistleblower provisions will most certainly be triggered.

As one senior executive in the Administration recently shared with me, “2017 is going to be a mess”. Probably so. But for companies who make the right choices now, 2017 could also be the year of competitive opportunity.