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Canadian suppliers worried about ‘redundant’ U.S. act

|Written By Andi Balla
Canadian suppliers worried about ‘redundant’ U.S. act

Canadian manufacturers that export to the United States are bracing for possible changes to U.S. legislation that will mean redundant legal hassles and costs, say business representatives, lawyers, and Canadian officials.

The proposed U.S. foreign manufacturers legal accountability act would require any exporter to the United States to get a local agent in the area where most of the exports go. The agent would then be held liable if there are certain problems with the products.

Supporters say the legislation will ensure consumers have a remedy in the courts and can be made whole if they require compensation for injuries or property damage. The bill is aimed at China, but as often is the case recently, it puts all countries in one basket, forcing Canada to make a case for an exemption.

The key legal difference is that U.S. judgments against Canadian companies are enforceable. In China, it is a different story, say lawyers.

“I don’t really know what it means to get a legal agent. I’m not sure how it will work, but I know it will add costs and complication, and it is utterly unnecessary and totally redundant because of the enforceability in Canada of U.S. decisions,” says John Hayward, president of Hayward Gordon, a company that manufactures industrial pumps in the Greater Toronto Area and exports a lot to the United States.

Hayward tells InHouse that when his company was mistakenly named in an Illinois lawsuit, he had to go to the expense of defending it.

“We knew it was dismissible, but we got legal advice that if we didn’t do anything . . . it can be an issue because judgments issued in the United States against Canadian companies are enforceable,” he says.

Hayward’s company is not big enough to have an in-house legal department so the advice was coming from his external lawyer, Frank A. Archibald, a partner at McMillan LLP.

Archibald says he advises his clients that it is easy for U.S. judgments to be enforced in Canada. So, he adds, the new legislation is redundant and will only result in added costs and complications for Canadian exporters.

“Any Canadian supplier into the United States is exposed now,” says Archibald. “The only thing this adds is the expense and the hassle. It doesn’t really help the U.S. consumer because they already have that recourse — the Canadian supplier is already exposed, so what you have got here is another bureaucratic step that adds expense.”

That’s a message being heard loud and clear by Canadian government officials.

Ottawa went on the offensive with the Canadian ambassador in Washington, Gary Doer, sending a letter to the speaker of the U.S. House of Representatives, Nancy Pelosi.

Doer says the legislation might be in violation of the U.S. trade commitments, but also adds that on the legal side, the legislation is redundant when it comes to Canada.

“Injured American plaintiffs can sue a Canadian manufacturer just as easily as they could sue an American manufacturer,” Doer wrote in the letter, made available through the Canadian Press. “More importantly, Canadian courts routinely enforce American court judgments where the American court has jurisdiction and due process is followed.”

Canadian International Trade Minister Peter Van Loan says the bill is badly crafted and will affect a lot of unintended targets, including Canadian companies. He says an exception should be worked in for Canada.

However, Canada is not the only one crying foul. European Union officials have also expressed strong concerns about the bill.

U.S. officials insist Canada is not the target of the legislation. They say they are trying to protect Americans on the heels of the Chinese toxic drywall scandal. And because the legislation deals with the protection of health and life, supporters say it should be exempted from any trade treaties the U.S. has signed.