Post-9/11 notification requirement for Canadian exports to U.S. irks Alberta business amid NAFTA talks
'We want to expand our markets, we want to make it as easy as possible to do business,' says trade minister
Jerry Bigam fondly remembers the day "way back when" the new automated order notification system at his bakery crashed the U.S. Food and Drug Administration (FDA) website.
"We shut down the U.S. trade system twice when we overloaded the computers," said the CEO of Kinnikinnick Foods, an Edmonton manufacturer of gluten-free and allergen-free foods like breads and pastries.
The requirement to provide prior notice — a detailed documentation of processed food shipments from Canada into the U.S. — added unfair cost and complexity to doing business that U.S. competitors still don't face today, said Bigam,
He refers to it as a "prime example" of trade inequity and a "substantial" non-tariff trade barrier between Canada and the United States. Bigam said he hopes the prior-notice regulation will get a new airing during the current NAFTA talks.
"This was one of those unanticipated consequences, I guess," Bigam said. "No one had any idea what this prior notice would mean for those of us in the internet business."
According to information on the FDA website, the prior-notice requirement is part of the U.S. Bioterrorism Act that was passed in 2002, "as a part of its ongoing effort to combat terrorism."
The intention of the prior-notice regulation was to thwart the ability of "international terrorists to carry out terrorist attacks in the U.S. by contaminating imported foods."
It means Bigam's company must advise the FDA of what is being shipped and the address where it's being sent.
"It doesn't sound like much," said Bigam. But the requirement has added one-way costs and complexity to what should be a smooth two-way system of open trade.
Kinnikinnick Foods operates two of the largest gluten-free food processing plants in the world, with 70 per cent of its export business going to the United States, Bigam said.
"It's a critical part of our business," he added. "Without that American market, we would have a very much smaller operation."
500,000 notices per year
"Every year, I do something like 500,000 prior notices," Bigam said. "Who's looking at 500,000 prior notices one little company makes into the U.S.?
"If you're one of my customers in the U.S. and you buy 10 different products from me in Edmonton, I have to advise the FDA of 10 prior notices," said Bigam, whose company spent $250,000 to develop an automated notification system that's now integrated with the FDA.
"Either get rid of the prior-notice system, or require the Americans to do the same thing," he said.
According to the Alberta Food Processors Association (AFPA), food processing is the largest manufacturing sector in Alberta — worth $15 billion annually and employing 27,000 people.
AFPA president Marilynn Boehm says prior notice is a big issue for companies such as Kinnikinnick, which ship most of their product into the U.S., but a lesser problem for companies that might send only a single shipping container.
"You talk about updating conditions, there's a prime example," said Bigam, who this week fired off reminders to the provincial and federal governments to keep the issue top of mind while engaging in NAFTA negotiations.
This week, Alberta's Minister of Economic Development and Trade Deron Bilous held discussions with U.S. legislators and lawmakers at the Council of State Governments West conference in Tacoma, Wash.
Speaking to reporters after the conference Thursday, Bilous said the topic of trying to "thin the borders" and harmonize some regulations did come up.
"We want to expand our markets, we want to make it as easy as possible to do business," said Bilous, emphasizing the Canadian and U.S. markets are now highly integrated in many sectors.
"When I delivered my keynote, there were a significant number of head nods," he said, referring to agreement on reducing trade barriers in both countries.
Runjuan Liu, an associate professor of business economics at the University of Alberta, says even though NAFTA presumably created a tariff-free trade zone, there are many areas which are still excluded, such as softwood lumber.
"It should be free trade," said Liu. "Even though it's a big pact, many areas can be exempted."
Driven by politics
"We have less [border issues now] than we had before NAFTA and the Canada-U.S. free trade agreement," said Rolf Mirus, a professor emeritus of marketing, business economics and law at the U of A.
But Mirus cautioned that these NAFTA negotiations are not exclusively economically driven.
"They're driven by political needs in Washington," he said.
Referring to U.S. President Donald Trump, Mirus said if NAFTA was only about economics, then "tweaking" the agreement would be all that's needed.
"We're dealing with someone who doesn't understand economics there, and who just wants to satisfy a particular type of voter," he said.