On March 14, 2016 the U.S. and Canadian governments signed a new pre-clearance customs agreement. According to the Department of Homeland Security, the pre-clearance agreement “will benefit travelers and trade by reducing congestion and increasing efficiency at the border”.  This will be accomplished by expanding customs pre-clearance locations in Canada to reduce waiting time, and increase the cross-border exchange.

The following is a brief overview of the new pre-clearance regulation, prepared by A.G. Tax cross-border tax professionals for taxpayers who are regularly travelling between Canada and U.S., and for those individuals who are involved in cross-border export or import businesses.

Why was the new Pre-clearance Customs agreement implemented?

Goods and Individuals are always crossing borders between the U.S. and Canada. According to a White House press release, at the U.S.-Canada border, nearly one million dollars in goods and services cross every minute, as well as 300,000 people every day, who cross for business, pleasure, or to maintain family ties.

The increase in U.S. border security after the 9/11 attack, and implementation of various rules, lead to a decline in land travel due to a slow and time-consuming verification process when crossing the border. This sparked a study and negotiations between both U.S. and Canadian officials to implement an action plan that would provide for ease of border crossing while maintaining enhanced security measures.

What is pre-clearance?                                                           

Pre-clearance is the process by which U.S. officials stationed in Canada check passengers and their accompanying goods or baggage that are heading to the United States before they leave Canada.  These officials then make decisions whether the individuals and/or the goods are admissible in the U.S.

How will the new U.S. Canadian pre-clearance customs agreement affect travel?

As per the new regulation, customs officers will prescreen travelers crossing the border by mediums other than by air, such as: bus, train, or boat. The previous agreement supported prescreening of only those individuals travelling by air.

Currently, eight Canadian airports, and Vancouver’s Pacific Central train station have U.S. Customs and Border Protection pre-clearance facilities allowing passengers to skip traditional border stops when entering the U.S The agreement will increase the amount of locations able to perform the preclearance and will expand the process to include train, boat and land travel.

Additionally, it has also been proposed that cargo arriving at major ports in either of the countries will be inspected which will help alleviate border congestion for truck drivers. Currently, trucks are being inspected on both the U.S. and Canadian side of the border.  The agreement, would eliminate the second check on the U.S. side, easing up wait times.  Eventually, preclearance might be possible at warehouse facilities, however, this would not be implemented until well into the future.

Overview of the New U.S. Canadian Pre-Clearance Agreement

According to this press release on the Homeland Security website, the agreement will cover the following:

  • Allow for consideration of requests for new preclearance locations across all modes of travel
  • Enable exploration of co-location at small and remote ports, if desired
  • Provide updates to the Air Preclearance Agreement to better reflect the post 9/11 operating environment, including policies and tools utilized at domestic ports of entry
  • Enable Canada to request that the United States regularize existing U.S. immigration pre-inspection sites – for example at cruise, rail and ferry terminals in British Columbia;
  • Enhance authorities for preclearance officers including the ability to carry firearms, defensive tools, and restraint devices to the same extent that Host Party officers are permitted to carry in the relevant operating environments;
  • Address officer privileges and immunities through a shared jurisdictional framework in which the sending country may generally exercise primary criminal jurisdiction for acts committed by its officers in the performance of official duties in the Host country; and
  • Retain the civil and administrative prosecutorial jurisdictions for preclearance officers provided for in the current Air Preclearance Agreement. 

In 2014, legislation was passed that allowed the border authority of both countries to maintain record of the number of days spent by individuals in the other country to keep count of days. This would prevent people from overstaying their visas (business or pleasure),  identify individuals that are fulfilling the residency requirement of the particular country, identify individuals who have been removed due to criminal purposes and prevent individuals from assuming two separate identities: one in U.S. and the other in Canada.

Neither the U.S. nor Canadian government has provided details on how this new pre-clearance customs infrastructure would be funded. New legislations would need to be prepared in both countries to implement this agreement in the two countries. Additionally, the U.S. government has legislative authority to obtain information of travelers but the Canadian government would need to take the necessary steps, such as passing of a bill to authorize information sharing.

That being said, this agreement is a major step forward in co-operation between U.S. and Canada, and would make travelling and goods transport between the two countries significantly more convenient and hassle-free. Although it is to be noted that the government has signed the agreement, proper framework is yet to be finalized on how the cross-border movement of goods and cargo will be carried out.

AG Tax LLP Can Help

If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.

Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canadian, and other international tax laws. We can assist with:

  • Canadian Personal and Corporate tax returns
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  • Estate Planning, Inheritance tax advice

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