Does your contract for the purchase or sale of industrial or commercial equipment, machinery or software make it harder for foreign service personnel to cross the border?
Canadian companies that buy industrial or commercial equipment, machinery or software from foreign companies may be able to take advantage of immigration provisions that allow foreign contractors to work in Canada without a work permit to perform after-sales services. However, if the proper wording is not included in the contract, the immigration process can be expensive, time consuming and frustrating.
Typically, a foreigner who is coming to Canada to install or repair equipment, machinery or software will require a work permit before working in Canada. If a work permit is required, both the purchasing company in Canada and the foreign contractor will have to make filings with the federal government. These filing fees with the government of Canada can range from $385 to $1,155 per contractor if a work permit is needed. Processing times can range from same-day entry to delays of weeks.
However, if the proper wording is included in the purchase contract, the foreign contractor would be exempt from obtaining a work permit and would be able to come to Canada without having to pay any immigration fees. This will allow for the more timely and costs effective installation, repair and service of the purchased equipment or software.
1. Do all purchases allow foreign contractors to enter Canada without needing work permits?
In order for companies to take advantage of the provisions that allow foreign contractors to enter Canada without work permits, the equipment, machinery or software being purchased must be commercial or industrial and cannot be for household or personal use.
In addition, the equipment, machinery or software must have been manufactured and purchased outside of Canada. If a Canadian manufactured product is sold in Canada by a U.S. entity, U.S. personnel would not be able to enter Canada to perform the work.
2. When can foreign contractors enter Canada to work without work permits?
The work permitted by this work permit exemption must be done pursuant to the original contract or as an extension of the original contract. As such, individuals responsible for the purchase or sales of these types of products must pay close attention to the contractual wording in these agreements.
3. What kind of work can foreign contractors do in Canada without work permits?
As long as it is in the contract, foreign contractors can:
- Install, set up and test the commercial equipment, machinery or software;
- Train or supervise Canadian workers on the commercial equipment, machinery and software;
- Supervise installers on the commercial equipment, machinery and software;
- Repair and service the commercial equipment, machinery or software;
- Perform software upgrades.
4. What work is not allowed – even if the contract stipulates it?
Not all work set out in the contract can be performed in Canada by foreign contractors. Foreign contractors are not permitted to do the following work, even if the contract calls for this:
- Operation of the equipment, machinery or software for production; or
- Hands-on installation performed by construction or building trades.
5. Does the work have to be provided by the company that sold the product?
Third-party service providers can carry out installation, repair and maintenance work as long as the original sales, lease or rental agreement clearly indicates this. Service contracts that are negotiated with a third party after the signing of the original sales/lease or rental agreement will not be permitted.
6. How do I word the contract or warranty?
Immigration, Refugees and Citizenship Canada does not set wording for these contractual provisions. As a result, it is up to the purchaser and seller to make sure that they carefully review their contracts and purchase orders to ensure the wording of the contract sufficiently contemplates the work that will be required.
7. How do I obtain a work permit exemption?
In order for the foreign contractors to be allowed to work in Canada without work permits, they must show that:
- They have the specialized knowledge necessary to carry out the work
- The work being requested is covered in the contract
- The equipment, machinery or software was made outside of Canada
- They have no intent to enter the Canadian labour market
- Their activity is international in scope
- Their primary source of remuneration will remain outside of Canada
8. What if my contract does not contain wording that obligates the seller to install the equipment, machinery or software?
If the contract does not contain the necessary wording to allow for foreign contractors to perform an installation, then the Canadian purchaser must go through a time consuming and more expensive immigration process known as a Labour Market Impact Assessment.
This process can take days or weeks and the filing fees per contractor are $1,155. In some provinces, additional provincial filings are necessary that can add time and costs to this process.
In addition, the application filed by the purchasing company requires the company to stipulate the terms of employment and working conditions of the foreign contractors entering Canada, even if they are not employees of the purchasing company. The stipulations can make the purchasing company subject to an immigration audit (known as an Employer Compliance Review) up to six years after the work concludes. A failure to pass such an audit can result in severe penalties to the purchasing company. As a result, the purchasing company must meet extra record keeping responsibilities.
Because of all this, it is clear that dealing with the contractual issue at the front end – with a properly worded contract – is essential.
9. What if my equipment is out-of-warranty but needs repair?
The ability of a foreign contractor to enter Canada for repair work only lasts as long as the after-sales service provision in the original contract or extension to the original contract. If a Canadian company needs emergency repair or maintenance work done on out-of-warranty equipment, machinery or software, the foreign contractor will require a work permit to complete but will not have to through the Labour Market Impact Assessment process needed for installers.
In order for the foreign worker to qualify for this type of work permit, the company in Canada must show that:
- Failure to repair the industrial or commercial equipment or software would have a negative impact on productivity (i.e. Canadian jobs would be greatly affected if the equipment is not repaired in a timely fashion);
- There is no commercial presence in Canada by the company that manufactured the industrial or commercial equipment.
Typically, the maximum duration a foreign contractor will be allowed in Canada to conduct out-of-warranty service is 30 calendar days or less. The foreign contractor coming to repair the equipment must have specific knowledge to repair the equipment.
In this process, the Canadian company must first complete and submit an Offer of Employment to a Foreign National Exempt from a Labour Market Impact Assessment (an online form) which requires payment of a $230 employer compliance fee. Once this is done, the foreign contractor must apply for and obtain a work permit. The cost of this is $155.
Like the Labour Market Impact Assessment process, this process requires the purchasing company to stipulate the terms of employment and working conditions of the foreign contractors and opens the purchasing company up to potential immigration audits up to six years after the work concludes.
We regularly assist Canadian companies requiring foreign workers to come and perform after-sales services or out-of-warranty repair. Additionally, if a Canadian company is contemplating the purchase of commercial or industrial equipment from a manufacturer outside of Canada, we can also assist in the review of the original sales, lease or rental agreement.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.