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Hi. I am an US citizen currently residing in Canada with a temporary work permit. I am staying with my wife (Canadian citizen) and we are looking to start the sponsorship process. Can I apply using the outland process? Or will I need to apply inland? Having the ability to cross the border during the application process is very important and so applying outland is preferred.

If I am able to apply outland what address do I use since I am actually living in Canada while under my work permit?

Thank you for all your help.
 
Your PR application processing should be outland - at Buffalo.
'Outland' applications begin assessment in Canada, at the Case Processing Centre in Mississauga, Ontario. This is where the sponsor's eligibility is assessed. If the sponsorship is approved, the application is then transferred by CPC-M to an overseas visa office - based on the criteria mentioned above. Typically an application will be transferred to the embassy that represents an applicant's country of birth/citizenship.
 
You should take a look at this link: http://www.canadavisa.com/canada-immigration-discussion-board/spousal-sponsorship-t46995.0.html

I would definitely say do Outland no matter what. I would say to use your Canadian adress.
 
In your case, applying Outland makes a lot more sense because Buffalo processes apps much faster than inland applications. You can see the difference (14 months vs. 19 months for 80% of the cases) at http://www.cic.gc.ca/english/information/times/perm-fc.asp.