On Jan. 21, 2015, the Government of Canada released a copy of an order issued on Jan. 19, 2015 under the Foreign Extraterritorial Measures Act that prohibits persons in Canada from complying with “Buy America” requirements pertaining to the redevelopment of the Prince Rupert Port Authority. The Canadian Government has stated that, as a result of the “Buy America” restrictions, suppliers of Canadian iron and steel products and related services are not permitted to participate in the redevelopment project as primary contractors or subcontractors, thereby discriminating against Canadian suppliers.
The order, available online at: Foreign Extraterritorial Measures Act order, makes it a criminal offense for “any person in Canada” to comply with specified US Regulations that require all iron and steel products that are incorporated into the redevelopment project to be manufactured in the United States , as well as “any directive, instruction, intimation of policy or other communication supporting their application from a person who is in a position to direct or influence the policies of the person in Canada, including those contained in any tender documents issued in respect of those alterations or improvements”. The Canadian Government has stated that, as a result of the “Buy America” restrictions, suppliers of Canadian iron and steel products and related services are not permitted to participate in the redevelopment project as primary contractors or subcontractors, thereby discriminating against Canadian suppliers.
According to the Regulatory Impact Analysis Statement (RIAS), the order will prohibit “persons in Canada” from complying with any certification or declaration requirements that state that the successful bidder will comply or has complied with the applicable “Buy America” measures, such as those found in tender documents or imposed within audit procedures.
The order is not the first to be issued under the Foreign Extraterritorial Measures Act. The Foreign Extraterritorial Measures (United States) order, 1992 (amended in 1996) has for many years caused considerable angst for Canadian subsidiaries of U.S. Corporations, which are subject to extraterritorially applied U.S. embargos relating to Cuba. The 1992 Cuba order prohibits Canadian corporations and their directors, officers, managers and employees from complying with the U.S. embargos, therefore creating a “catch-22” situation whereby compliance with U.S. law creates non-compliance with Canadian law, and vice versa. Importantly, the prohibition in the January 19th Prince Rupert Port Authority order appears broader in its application than the 1992 Cuba order, in that it is applicable to all “persons in Canada,” and not just to Canadian corporations and their employees.
The RIAS to the January 19th order warns that possible violations of the order would be investigated by the Royal Canadian Mounted Police. The RIAS suggests that a prerequisite to the commission of an offence under the order is service of a ministerial order on the person. This requirement, and how exactly it operates, has been a matter of speculation under the 1992 Cuba Order, under which there have been no known prosecutions.
Contravention of FEMA attracts severe penalties. On conviction on indictment, corporations are subject to a maximum fine of $1,500,000, while individuals are subject to a maximum fine of $150,000 or to imprisonment for a term not exceeding five years, or to both. On summary conviction, fines for corporations are a maximum of $150,000, while individuals face fines of up to $15,000 or a term of imprisonment not exceeding two years, or both.
On the same day as the FEMA Order was released, the government of Alaska announced that it had suspended the ferry terminal redevelopment until the trade issue can be resolved.