Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Are You Ready for CETA?: 20 Questions That Canadian Importers Should Be Asking

Posted in Canada's Federal Government, Canada-EU CETA, Corporate Counsel, Cross-border trade, Customs Law, Imports Restrictions, origin, tariff classification, Trade Agreeements, valuation

chessThe Canada-European Union Comprehensive Economic and Trade Agreement (“Canada-EU CETA”) is a free trade agreement between Canada and the 28 countries of the European Union.  The Canada-EU CETA is Canada’s largest free trade agreement since NAFTA.   There are opportunities for Canadian importers to save the customs duties on goods that they are currently importing (that is, goods that will be subject to duty elimination or duty reduction) and/or find new goods to import.

Provisional application of the Canada-EU CETA will take place on the first day of the month following Canada’s ratification of the Canada-EU CETA and Canada’s notification to the European Union that the Canada-EU CETA has been ratified (which will likely take place on the same day as Canada passes Bill C-30 into law).  On February 15, 2017, the Canada-EU CETA was ratified by the European Parliament.  This means that Canada completing the Canadian legislative process and formally ratifying the Canada-EU CETA is all that stands between Canadian retailers and their new and improved opportunities.

On March 7, 2017, Bill C-30 “An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures” passed second reading in Canada’s Senate.  Bill C-30 is now being reviewed by the Senate of Canada Standing Committee on Foreign Affairs and International Trade.  After the Report is prepared by the Standing Committee on Foreign Affairs and International Trade, Bill C-30 returns to the Senate for third reading and debate.  After third reading, the Canada-EU CETA can be ratified.

The current thinking is that the Canada-EU CETA will be provisionally implemented in Spring 2017.  My best guess is provisional implementation will be May 1, 2017 or June 1, 2017.  Are you ready?

What does “provisional implementation” mean?

“Provisional implementation” means that all or almost all of the market access provisions for goods and services will be implemented as soon as the European Parliament and the Government of Canada have ratified the Canada-EU CETA.  The effect of provisional implementation is that the non-controversial provisions (96% of the Canada-EU CETA provisions) go into effect even though there are outstanding issues relating to the investment chapter to resolve.  There are EU Members who have concerns about the investor-state dispute mechanism and the competency of the EU Parliament to enter into a free trade agreement (rather than requiring EU Members Parliamentary approval).

From which countries may Canadian importers purchase CETA goods?

Canadian importers may benefit from the Canada-EU CETA duty relief commitments made in respect of imports originating in the 28 European Union countries, which are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

Iceland, Liechtenstein, Norway, and Switzerland are not EU Members. Iceland, Liechtenstein, Norway, and Switzerland signed that Canada-European Free Trade Association Free Trade Agreement (the “Canada-EFTA FTA”) and it has been in effect since July 1, 2009.  Most EFTA-origin goods already enter Canada duty-free under the Canada-EFTA FTA.

What Questions Should Canadian importers be asking to get ready for provisional application?

Canadian importers should get ready to take advantage of the Canada-EU CETA benefits. It is time to start asking questions, such as:

  1. What goods do I currently import from an EU Member?
  2. What new goods would I like to import from an EU Member?
  3. Do those goods that I currently import or would like to import from an EU Member meet the rules of origin in the Canada-EU CETA?
  4. What is the H.S. classification of the good to be imported from the EU? (you need the answer to this question in order to review Canada’s commitments for duty elimination/duty reduction)?
  5. Are the goods that I import/wish to import within Canada’s Schedule of duty elimination/duty reductions commitments in the Canada-EU CETA? (If the answer is yes, then the goods may not be duty free immediately, if the answer is no, you still must ask questions about origin before knowing if the goods are duty-free immediately upon implementation)
  6. What is the rule of origin in the Canada-EU CETA applicable to that good based on that H.S. classification number?
  7. Do the goods originate in an EU Member according to the Canada-EU CETA rules of origin? (you may need more information or assistance from customs counsel to answer this question)
  8. What is the applicable duty rate of the goods?
  9. Who within my organization must update computerized records and databases so that customs documentation will be correct after provisional implementation?
  10. What changes need to be made within our computerized record keeping programs and databases?
  11. Has there been a meeting with the customs broker and freight forwarded to make sure that they have updated computerized records and databases?
  12. Do I have the necessary Certifications of Origin from suppliers of EU-origin goods?
  13. What is the value for duty for customs purposes of the goods to be imported? (This would be a good time to revisit the issue and consider whether kits comprise EU-origin goods and non-EU origin goods)
  14. What documentation do I need before I can import this good?
  15. Do I require other governmental certification approvals for the goods I import/plan to import from the EU?
  16. Are there any Canadian labelling or marking requirements for the goods?
  17. What record keeping requirement do I have to implement under Canadian law to maintain Canada-EU benefits that I claim?
  18. Do I require quota to import the goods?
  19. Do I import any goods (foodstuffs, wines, spirits, beer) from a non-EU country that would be affected by the Canada-EU CETA geographic indications restrictions (for a list of products subject to Canada-EU CETA restrictions, please refer to the GI List)?
  20. Are the goods subject to antidumping or countervailing duties?

There are many other important questions to ask – hopefully this gets you started asking questions.  If you require any assistance, please contact Cyndee Todgham Cherniak at 416-307-4168 or Cyndee@lexsage.com.  There are many useful articles posted on the LexSage website.

DOJ Defines Compliance

Posted in Aerospace & Defence, Agriculture, Antidumping, Border Security, Buy America, Controlled Goods Program, Corporate Counsel, Criminal Law, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Exports, FCPA/Anti-Corruption, Imports Restrictions, Intellectual Property, Legal Developments, Trade Agreeements, Trade Remedies

In the span of the last 18 months, the topic of corporate compliance programs has gotten considerable attention from the Department of Justice  (“DOJ”) and now finally, DOJ has published significant details about how it is likely to measure the sufficiency of any company’s compliance program.

First, some background.  In September 2015, the Yates memo was published, see DOJ Sets Its Sights on Officers and Directors for more details. In short, then Deputy Attorney General Yates reminded the DOJ offices nationwide, if a corporation has violated the law,  its level of cooperation will be measured, in large part, by whether it provides “all” the relevant details, which means did the company identify the individuals whose actions or inactions resulted in the violations under consideration, and provide supporting documentation to show what happened and how those individuals were involved. If the company did not do so, it does not get full credit under the Sentencing Guidelines.

The Sentencing Guidelines are issued by the U.S. Sentencing Commission and provide judges with the guidelines to apply when sentencing for each conviction. They were first issued in 1987 and have been updated just about yearly since then. Section 8B2.1 of the 2016 Sentencing Guidelines defines as “effective compliance and ethics program” as one that will: “(1)  exercise due diligence to prevent and detect criminal conduct; and (2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law”, and goes on to state: “[s]uch compliance and ethics program shall be reasonably designed, implemented, and enforced so that the program is generally effective in preventing and detecting criminal conduct. The failure to prevent or detect the instant offense does not necessarily mean that the program is not generally effective in preventing and detecting criminal conduct.”

The Yates memo was followed in April 2016  by the Weissman letter.  Andrew Weismann as   Chief of the Fraud Section, Criminal Division, U.S. Department of Justice, issued a letter providing more details about what constitutes a robust compliance program. We addressed this topic here – The Art of Self-Defense. As we said then, the goal of a robust compliance program is to: “ensure the  adequacy of internal enforcement of that program … underscoring the compliant nature of the company and mitigating the consequences of any misdeeds which may occur, in the face of enforcement action by any of the federal agencies with jurisdiction over your company”.

Mr. Weissman’s defined the components as:

  1. A well-defined/well-documented compliance program;
  2. Adequate training of affected employees and related internal and external stakeholders about your compliance program;
  3. Proper internal enforcement, including discipline/consequences, for those that violate its provisions; and
  4. Timely disclosure of violations to the appropriate authoritative body.

DOJ also acknowledged the size and resources of a company are a factor, but key points are a culture of compliance, sufficient resources dedicated to compliance,  the quality and experience of the compliance personnel and their independence, that the compliance program performs an effective risk assessment, that it is tailored accordingly, how compliance personnel are compensated and promoted, adequate auditing, and an appropriate reporting structure for compliance personnel within the company.

The next occasion when compliance was addressed occurred in October 2016 when DOJ’s National Security Division published: Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations.  This notice confirmed the principals being applied to evaluate the effectiveness of compliance programs in the Foreign Corrupt Practices Act context also applied to export violations and further made clear that full disclosure meant exactly that: what happened and who caused it?  When it comes to export violations, DOJ gives a priority to those involving willful export control and sanctions violations. Perhaps the only portion of the notice which was not previously so clearly articulated was the list of aggravating factors:

 Exports of items controlled for nuclear nonproliferation or missile technology reasons to a proliferator country;

 Exports of items known to be used in the construction of weapons of mass destruction;

 Exports to a terrorist organization;

 Exports of military items to a hostile foreign power;

 Repeated violations, including similar administrative or criminal violations in the past;

 Knowing involvement of upper management in the criminal conduct; and

 Significant profits from the criminal conduct, including disproportionate profits or

margins, whether intended or realized, compared to lawfully exported products and services.

The Guidance also included some hypotheticals to illustrate how its provisions should be applied.  The Guidance in its entirety can be found at: DOJ Export Violation Guidance.

Now, finally, on February 8, 2017, DOJ issued its Evaluation of Corporate Compliance Programs.  This document was quietly posted to DOJ’s website, on the Strategy, Policy and Training, Compliance Initiative page without any public comment.  Given the Attorney General was sworn in the next day, it is always possible its contents will be revised in the new administration. Even if the evaluation were to be unpublished or otherwise overruled by Mr. Sessions, the criteria it contains provide reasonable guidance for all companies when measuring their compliance efforts.

Due to its detailed nature, we are providing a link to the full document which can be found here: Compliance Program Evaluation. The document lists a number of questions under topics which DOJ will ask about when evaluating any compliance program, and the list is neither the only questions which might be asked nor does each factor apply in all circumstances.  The questions address these topics: Analysis and Remediation of Underlying Misconduct; Senior and Middle Management; Autonomy and Resources; Policies and Procedures; Operational Integration; Risk Assessment; Training and Communications; Confidential Reporting and Investigation; Incentives and Disciplinary Measure; Continuous Improvement, Periodic Testing and Review; Third Party Management; and Mergers and Acquisitions.

Companies are advised to carefully review this latest publication from DOJ in order to make sure they meet the highest standards when it comes to compliance programs.  Given this DOJ publication, it is likely the standards it articulates are those which will be relied upon not only by DOJ, but also civil enforcement action taken by any agency, and also any lawyers prosecuting and defending civil lawsuits. Does your compliance program measure up?

The Border Tax: What Will It Do?

Posted in Cross-border deals, Cross-border trade, Customs Law, NAFTA

It is far too early to tell the extent of any change to the relationship between the U.S. and Mexico, in the face of the oft-repeated insistence of the Trump campaign to “renegotiate” NAFTA, a promise that was reiterated once Mr. Trump was sworn into office. Following a prickly meeting last month between President Trump and Mexican President Enrique Peña Nieto, word out of Mexico is the government has started consultations with its business community, a process described as taking 90 days. The results of those consultations and how they might impact any further discussions with the U.S. remain to be seen. Similarly, President Trump and Canadian Prime Minister Justin Trudeau also met last month, but in somewhat more cordial circumstances. Again, next steps with Canada remain an open question. However, overarching all of this is the oft-repeated promise from the Trump Administration that a border tax will be imposed.  While nothing concrete has been proposed to date, how such a border tax might work has understandably caused varying levels of concern among American companies. Given there is nothing concrete to examine, in this Alert, we seek to provide a brief explanation of the concepts being bandied about.

As part of a larger overall reformation of the U.S. tax laws, House leadership is proposing the U.S. implement a “border adjusted tax” (“BAT”) on goods that are imported and consumed in the U.S.  Additionally, the BAT as conceived would provide tax breaks for goods that are exported.  Whether these tax breaks qualify as a “subsidy” and so are subject to challenge before the World Trade Organization or under any of the trade agreements to which the U.S. is a signatory remains to be seen and will, of course, be defined by the exact language adopted but, the WTO Agreement on Subsidies and Countervailing Measures, Article 1.1, defines a subsidy to include a fiscal incentive, such as tax breaks. This is the very argument the U.S. is currently making when complaining about China’s export tax refund regime.

U.S. corporations currently pay income taxes on their taxable income (or profits).  The BAT will adjust how these profits are calculated.  The BAT is different from the “border tax” that has been talked about by President Trump.  The President’s border tax would, as currently articulated, only apply to goods imported from Mexico, whereas the BAT would apply to goods imported from all countries.

The BAT is the brainchild of Alan J. Auerbach, a Professor of Economics and Law at U.C. Berkeley and was first proposed about 20 years ago.  The effect of the BAT is to convert the corporate income tax into a “destination-based cash-flow tax.”

A simple example helps illustrate how the BAT could work.  Assume that a U.S. manufacturer of jet engines exports those engines to Mexico where they are installed on airplanes that are made in Mexico.  The profit the U.S. manufacturer earns when it exports the jet engines to Mexico would not be subject to U.S. income tax.  On the other hand, if a U.S. aircraft manufacturer purchases the jet engines from a company in Mexico and imports and installs them on airplanes manufactured in the U.S., the profit the U.S. company makes on the airplanes it sells will be taxed by the U.S.  Additionally, the U.S. airplane manufacturer will not be able to claim a business expense deduction for the amount it paid to purchase the jet engines that it imported, or the labor cost to make those planes, which is the norm under the current tax regime.

One of the principal purposes of the BAT is to lower the tax rates to which U.S. corporations are subject.  At present, large U.S. corporations are subject to a tax rate of 35% on their income (which can be as high as 39% at certain income levels, and is one of the highest tax rates in the world).  The BAT would reduce that tax rate to 20%.

The BAT is conceptualized to provide economic incentive for companies that export their goods, but is anticipated to be detrimental to companies that import goods.  Critics of the BAT assert it will result in an increase in the prices of imported goods.  This means, for example, the cost to consumers for our made in China electronic “toys”, found at your favorite big box retailer, would become much more expensive.  If that were to happen, the result could well impose inflationary pressure on the U.S. economy.  Proponents of the BAT, however, assert its imposition will result in increased foreign demand for products exported from the U.S.  This, in turn, could increase the value of the U.S. dollar, which could increase the demand for imported goods and offset their higher prices.  Which side wins or where the compromise point is found remain to be determined, but it is important to understand there are two distinct options being discussed.

The border tax is proposed to be levied strictly on Mexico, as noted, and is being discussed as a 20% tax on all goods imported from Mexico. Article 310 of NAFTA addresses Customs User Fees and provides:  “[n]o Party may adopt any customs user fee of the type referred to in Annex 310.1 for originating goods”.  However, Annex 310.1 specifics only the merchandize processing fee shall be eliminated by a date certain, which has long since happened.  No bar to the proposed tax seems to come from this provision. On the other hand,  Article 314 provides:

Except as set out in Annex 314, no Party may adopt or maintain any duty, tax or other charge on the export of any good to the territory of another Party, unless such duty, tax or charge is adopted or maintained on:

(a) exports of any such good to the territory of all other Parties; and

(b) any such good when destined for domestic consumption.

It seems a tax on the importation of goods from Mexico into the U.S. would violate this NAFTA provision.  Further hampering the potential for imposition of a border tax on goods imported from Mexico only is the provision in Article 318 which defines customs duty to include:

[A]ny customs or import duty and a charge of any kind imposed in connection with the importation of a good, including any form of surtax or surcharge in connection with such importation, but does not include any: “ (a) charge equivalent to an internal tax imposed consistently with Article III:2 of the GATT [i.e., equivalent to a tax that applies to like domestic product or in respect of an article from which the imported product has been manufactured or produced in whole or in part], or any equivalent provision of a successor agreement to which all Parties are party, in respect of like, directly competitive or substitutable goods of the Party, or in respect of goods from which the imported good has been manufactured or produced in whole or in part…” [emphasis added].

Leaving aside the potential consequences of any fallout (political, economic or otherwise), from the deterioration of the relationship between Mexico and the U.S., it is readily apparent a border tax on goods imported from Mexico presents some significant legal challenges to the Trump Administration.  One wonders how language could be developed which would get around these legal commitments by the U.S., unless, of course, they no longer existed!  The same, however, may not be the fate of the proposed border adjusted tax, but again, until we see the actual language, it is too early to tell.  However, when considering the BAT, one has to wonder how a company with strong cross-border operations would be able to determine what is and what is not taxable.  What happens when a company moves goods back and forth across the border multiple times so as to take advantage of specialized equipment or unique skills to produce the final product?  There are also provisions in existing trade law that provide duty reduction benefits when production moves across borders and products are either returned for repair or partial production takes place (think goods returned provisions in Chapter 98). Will those be tweaked or eliminated? What about goods that enter a foreign trade zone or other bonded facility?

The potential for accounting challenges is nightmarish. In the end, of course, the devil is in the details and no one knows right now what they will look like. Once they are published, we will all have a better idea of where things stand.  The challenge is what to do in the meantime?  And there are no good answers to that question right now!

Does Canada Have Label Requirements For Imported Goods?

Posted in Canada's Federal Government, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, origin

Question In Maze Showing Confusion And Puzzled

Canada has a number of requirements mandating that certain goods have labels AND that certain information be communicated on labels and packaging.  Goods may not be imported into Canada if the required markings are not on the goods to be imported.  If goods are not marked properly, the improperly marked goods may be seized by the CBSA and destroyed or returned to the country of export.  This is a cost that is best avoided – it is better to determine the marking and labelling requirements before the goods are shipped.

There are three primary types of markings:

  • Country of origin markings;
  • Labelling requirements; and
  • French language requirements.

The country of origin marking requirements are set out in the Customs Act and various regulations to the Customs Act.  Section 35.01 of the Customs Act provides that:

“No person shall import goods that are required to be marked by any regulations made under section 19 of the Customs Tariff unless the goods are marked in accordance with those regulations.”

The Marking of Imported Goods Regulations sets out marking requirements as does the Marking of Imported Goods OrderD-Memorandum D11-3-1 “Marking of Imported Goods” sets out the key CBSA country of origin marking/labelling requirements.

Labelling requirements are established under other Canadian federal laws, regulations, policies and guidelines as well as under provincial laws.  Unfortunately, all Canadian labelling requirements are not found in one single place.

Some examples of Canadian labelling requirements (and helpful resources) are:

Other Government Department Applicable Law Brief Description
Canada Revenue Agency Excise Act 2001

Stamping and Marking of Tobacco Products Regulations

Tobacco products are highly regulated in Canada and there are very specific labelling and advertising requirements.
CFIA Canadian Agricultural Products Act

Food and Drugs Act

Meat Inspection Act

Consumer Packaging and Labelling Act

The CFIA regulates what is on food labels in order to keep Canadians safe and provide information to Canadian consumers.

Labelling Requirements Checklist (Food Labelling)

Labelling Requirements

Guide to Food Labelling and Advertising

 

Industry Canada Consumer Packaging and Labelling Act Pre-packaged products must have a label containing a declaration of net quantity of the product in the prescribed form and manner.

Guide to the Consumer Packaging and Labelling Act and Regulations.

Competition Bureau Consumer Packaging and Labelling Act

Textile Labelling and Advertising Regulations

Precious Metals Marking Act

The Competition Bureau has issued the Guide to Consumer Packaging and Labelling Act and Regulations (October 1999).

The Competition Bureau has issued the Guide to Textile Labelling and Advertising Regulations.

The Competition Bureau has issued the Guide to the Precious Metals Marking Act and Regulations.

Government of Quebec Charter of the French Language and French Language Regulations Labels on products sold in Quebec must be in French.  There may be other language in addition to French.
Health Canada Hazardous Products Act Consumer Products Safety Act, Regulations of Narcotics and Controlled and Restricted Drugs

 

Health Canada enforces labelling requirements on controlled products and containers in which controlled products are packaged.

Labelling Requirements Checklist

Labelling of Cosmetics

Frequently Asked Questions About Nutritional Labelling

Labelling of Pharmaceutical Drugs for Human Use

NRCan   NR Can regulates labels regarding energy performance.  NRCan publishes information for importers.

EnerGuide package labelling

EnerGuide Rating

EnerGuide Labelling Instructions and Labelling Scales for Appliances and Room Air Conditioners

 

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  For more information about Canada’s customs laws, please refer to the LexSage website, which contains many helpful articles.

Ukraine Has Ratified The Canada-Ukraine FTA, Canada’s Turn Is Next

Posted in Canada-Ukraine FTA

Signing Ukraine FTAOn March 14, 2017, the Ukrainian Parliament voted to ratify the Canada-Ukraine Free Trade Agreement. Ukraine is ready to ratify the Canada-Ukraine FTA.

On March 7, 2017, BillC-31 “An Act to implement the Free Trade Agreement between Canada and Ukraine passed second reading in Canada’s Senate.  Bill C-31 is now being reviewed by the Senate of Canada Standing Committee on Foreign Affairs and International Trade.  After the Report is prepared by the Standing Committee on Foreign Affairs and International Trade, Bill C-31 returns to the Senate for third reading and debate.  After third reading, the Canada-Ukraine Free Trade Agreement (“Canada-Ukraine FTA”) can be ratified.  This should happen at the same time at the Canada-EU CETA, which is expected to be ratified by Canada soon (maybe as early as April 1 or May 1).

The Canada-Ukraine FTA is a trade in goods agreement (that is, it does not cover services and investment). Canada has agreed to reduce most customs duty rates to “free” or 0% immediately upon implementation on goods that meet the rules of origin.  Pursuant to Chapter 2 of the Canada-Ukraine FTA, each party shall reduce or eliminate customs duties on goods originating in either party in accordance with the tariff elimination schedules in Annex 2-B.  In Article 1 of Annex 2-B, Canada agrees to eliminate customs duties on all goods in Chapters 1-97 of the Harmonized System that provides for Most-Favoured-Nation rate of duty, with the exception of any goods Canada has listed in Annex 2-B (which is a short list).  We have prepared a chart that sets out H.S. Chapters and which Chapters become duty-free immediately upon implementation.

Some of the goods that Canadian importers may look forward to importing on a duty free basis are:

  • Ukrainian beer;
  • Ukrainian vodka;
  • Ukrainian chocolate;
  • Pysanka/pysanky;
  • Table cloths;
  • Ceramics;
  • Clothes;
  • Toys;
  • Copper; and
  • Walking sticks.

To know more about Ukraine’s top exports to various countries around the world, please refer to this helpful resource.

For more information about the Canada-Ukraine Free Trade Agreement, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.

What Goods Can Canadian Importers Import Duty Free When The Canada-EU CETA Comes Into Effect?

Posted in Agriculture, Canada-EU CETA, Cross-border trade, Customs Law, origin, tariff classification

Question In Maze Showing Confusion And Puzzled

It is expected that the Canada-European Union Comprehensive Trade and Economic Agreement (“Canada-EU CETA”) will come into provisional effect soon (maybe as soon as April 1, 2017 or May 1, 2017 – not yet known). Canadian importers should start to consider what goods may enter Canada duty free when the Canada-EU CETA green light is turned on.

The 28 European Union countries are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

Most goods originating in the European Union (which is an important fact to determine before importing) will enter Canada duty free immediately. For example, a few of my favorite things will enter duty free:

  • Chocolate from Spain and Belgium;
  • Wine from Italy, Spain, France and Germany (in that order);
  • Port from Portugal;
  • Spanish ham;
  • Italian shoes;
  • British tweed jackets;
  • Marks & Spencer’s crackers and Batenberg cake;
  • Marks & Spencer’s socks (if made in the UK);
  • French furniture.

The list is very long as to what enters duty free immediately.  If you import agricultural products, agri-food, cheese, pork, fish & seafood, vehicles or parts, ships, or flowers, you should review Canada’s schedule before importing as these items may be exempted from duty relief or may be subject to a staged elimination of customs duties in Canada. Canada maintained certain protections for supply-managed goods.

We have prepared a chart of the Harmonized Systems chapters and Canada’s market access commitments.  You must know the H.S. Chapter for the goods in order to read the chart and know whether the EU-origin goods that you plan to import will be duty-free immediately:

H.S. Chapter Description 2016 MFN Rate of Duty In Canada What Canada’s Schedule Says
1 Live animals Up to 238% Some items duty free immediately

 

Some items excluded from duty relief

2 Meat and edible meat offal Up to 249% Some items duty free immediately

 

Some items excluded from duty relief

3 Fish and crustaceans, molluscs and other aquatic invertebrates Up to 5% Entire Chapter is duty free immediately
4 Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere specified or included Up to 313.5%

 

Some items duty free immediately

 

Some items excluded from duty relief

 

Some items subject to Staging Category A

5 Products of animal origin, not elsewhere specified or included Free Entire Chapter is duty free
6 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage Up to 16% Some items duty free immediately

 

Some items subject to Staging Category B

7 Edible vegetables and certain roots and tubers Up to  $10.31/kg Entire Chapter is duty free immediately
8 Edible fruit and nuts; peel of citrus fruit or melons Up to 14.5% Entire Chapter is duty free immediately
9 Coffee, tea, maté and spices Up to 3% Entire Chapter is duty free immediately
10 Cereals Up to 94.5% Some items duty free immediately

 

Some items subject to Staging Category C

11 Products of the milling industry; malt; starches; inulin; wheat gluten Up to $397.30/tonne Some items duty free immediately

 

Some items subject to Staging Category C

12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder Up to 10% Entire Chapter is duty free immediately
13 Lac; gums, resins and other vegetable saps and extracts Free Entire Chapter is duty free
14 Vegetable plaiting materials; vegetable products not elsewhere specified or included Free Entire Chapter is duty free
15 Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes Up to 218%

 

Some items duty free immediately

 

Some items excluded from duty relief

16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates Up to 253% Some items duty free immediately

 

Some items excluded from duty relief

17 Sugars and sugar confectionery Up to $30.86/tonne Some items duty free immediately

 

Some items subject to Staging Category S

18 Cocoa and cocoa preparations Up to 265% Some items duty free immediately

 

Some items excluded from duty relief

19 Preparations of cereals, flour, starch or milk; pastrycooks’ products Up to 267.5% Some items duty free immediately

 

Some items excluded from duty relief

20 Preparations of vegetables, fruit, nuts or other parts of plants Up to 17% Entire Chapter is duty free immediately
21 Miscellaneous edible preparations Up to 277% Some items duty free immediately

 

Some items excluded from duty relief

22 Beverages, spirits and vinegar Up to 11% Some items duty free immediately

 

Some items excluded from duty relief

23 Residues and waste from the food industries; prepared animal fodder Up to 205.5% Some items duty free immediately

 

Some items excluded from duty relief

24 Tobacco and manufactured tobacco substitutes Up to 13% Entire Chapter is duty free immediately
25 Salt; sulphur; earths and stone; plastering materials, lime and cemen Up to 2.5% Entire Chapter is duty free immediately
26 Ores, slag and ash Free Entire Chapter is duty free immediately
27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes Up to 12.5% Entire Chapter is duty free immediately
28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes Up to 6.5% Entire Chapter is duty free immediately
29 Organic chemicals Free Entire Chapter is duty free
30 Pharmaceutical products Up to 6.5% Entire Chapter is duty free immediately
31 Fertilizers Free Entire Chapter is duty free
32 Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter; paints and varnishes; putty and other mastics; inks Up to 6.5% Entire Chapter is duty free immediately
33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations Up to 8% Entire Chapter is duty free immediately
34 Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, “dental waxes” and dental preparations with a basis of plaster Up to 6.5% Entire Chapter is duty free immediately
35 Albuminoidal substances; modified starches; glues; enzymes Up to 270% Some items duty free immediately

 

Some items excluded from duty relief

36 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations Up to 6.5% Entire Chapter is duty free immediately
37 Photographic or cinematographic goods Up to 6.5% Entire Chapter is duty free immediately
38 Miscellaneous chemical products Up to 15.5% Entire Chapter is duty free immediately
39 Plastics and articles thereof Up to 6.5% Entire Chapter is duty free immediately
40 Rubber and articles thereof Up to 15.5% Entire Chapter is duty free immediately
41 Raw hides and skins (other than furskins) and leather Free Entire Chapter is duty free
42 Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut) Up to 15.5% Entire Chapter is duty free immediately
43 Furskins and artificial fur; manufactures thereof Up to 15.5% Entire Chapter is duty free immediately
44 Wood and articles of wood; wood charcoal Up to 9.5% Entire Chapter is duty free immediately
45 Cork and articles of cork Free Entire Chapter is duty free
46 Manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork Up to 11% Entire Chapter is duty free immediately
47 Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard Free Entire Chapter is duty free
48 Paper and paperboard; articles of paper pulp, of paper or of paperboard Free Entire Chapter is duty free
49 Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans Free Entire Chapter is duty free
50 Silk Free Entire Chapter is duty free
51 Wool, fine or coarse animal hair; horsehair yarn and woven fabric Free Entire Chapter is duty free
52 Cotton Up to 8% Entire Chapter is duty free immediately
53 Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn Free Entire Chapter is duty free
54 Man-made filaments; strip and the like of man-made textile materials Up to 8% Entire Chapter is duty free immediately
55 Man-made staple fibres Up to 8% Entire Chapter is duty free immediately
56 Wadding, felt and nonwovens; special yarns; twine, cordage, ropes and cables and articles thereof Up to 16% Entire Chapter is duty free immediately
57 Carpets and other textile floor coverings Up to 14% Entire Chapter is duty free immediately
58 Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery Free Entire Chapter is duty free
59 Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use Up to 18% Entire Chapter is duty free immediately
60 Knitted or crocheted fabrics Free Entire Chapter is duty free
61 Articles of apparel and clothing accessories, knitted or crocheted Up to 18% Entire Chapter is duty free immediately
62 Articles of apparel and clothing accessories, not knitted or crocheted Up to 18% Entire Chapter is duty free immediately
63 Other made up textile articles; sets; worn clothing and worn textile articles; rags Up to 18% Entire Chapter is duty free immediately
64 Footwear, gaiters and the like; parts of such articles Up to 20% Entire Chapter is duty free immediately
65 Headgear and parts thereof Up to 15.5% Entire Chapter is duty free immediately
66 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof Up to 7.5% Entire Chapter is duty free immediately
67 Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair Up to 15.5% Entire Chapter is duty free immediately
68 Articles of stone, plaster, cement, asbestos, mica or similar materials Up to 15.5% Entire Chapter is duty free immediately
69 Ceramic products Up to 8% Entire Chapter is duty free immediately
70 Glass and glassware Up to 6.5% Entire Chapter is duty free immediately
71 Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof; imitation jewelry; coin Up to 8.5% Entire Chapter is duty free immediately
72 Iron and steel Free Entire Chapter is duty free
73 Articles of iron or steel Up to 8% Entire Chapter is duty free immediately
74 Copper and articles thereof Up to 9.5% Entire Chapter is duty free immediately
75 Nickel and articles thereof Up to 3% Entire Chapter is duty free immediately
76 Aluminum and articles thereof Up to 6.5% Entire Chapter is duty free immediately
77 (reserved for possible future use)
78 Lead and articles thereof Free Entire Chapter is duty free
79 Zinc and articles thereof Up to 3% Entire Chapter is duty free immediately
80 Tin and articles thereof Up to 3% Entire Chapter is duty free immediately
81 Other base metals; cermets; articles thereof Free Entire Chapter is duty free
82 Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal Up to 11% Entire Chapter is duty free immediately
83 Miscellaneous articles of base metal Up to 7% Entire Chapter is duty free immediately
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof Up to 9% Entire Chapter is duty free immediately
85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Up to 9% Entire Chapter is duty free immediately
86 Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signalling equipment of all kinds Up to 11%

 

Entire Chapter is duty free immediately
87 Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof Up to 13% Some items duty free immediately

 

Some items subject to Staging Categories B, C and D

88 Aircraft, spacecraft, and parts thereof Up to 15.5% Entire Chapter is duty free immediately
89 Ships, boats and floating structures Up to 25% Some items duty free immediately

 

Some items subject to Staging Categories B and D

90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof Up to 8.5% Entire Chapter is duty free immediately
91 Clocks and watches and parts thereof Up to 14% Entire Chapter is duty free immediately
92 Musical instruments; parts and accessories of such articles Up to 7% Entire Chapter is duty free immediately
93 Arms and ammunition; parts and accessories thereof Up to 7.5% Entire Chapter is duty free immediately
94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings Up to 15.5% Entire Chapter is duty free immediately
95 Toys, games and sports requisites; parts and accessories thereof Up to 8% Entire Chapter is duty free immediately
96 Miscellaneous manufactured articles Up to 8% Entire Chapter is duty free immediately
97 Works of art, collectors’ pieces and antiques Up to 7% Entire Chapter is duty free immediately

Pursuant to Chapter 2 of the Canada-EU CETA, each party shall reduce or eliminate customs duties on goods originating in either party in accordance with the tariff elimination schedules in Annex 2-A.  The staging categories for Schedule 2-A are as follows:

  • Category A – duties on originating goods shall be eliminated on the date this Agreement enters into force;
  • Category B- duties on originating goods shall be removed in four equal stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year 4;
  • Category C – duties on originating goods in a Party’s Schedule shall be removed in six equal stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year 6;
  • Category D – duties on originating goods in a Party’s Schedule shall be removed in eight equal stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year 8;
  • Category E  – duties on originating goods are exempt from tariff elimination in a Party’s Schedule are exempt from tariff elimination; and
  • Category S – duties on originating goods shall be removed in three equal stages beginning on the fifth anniversary of the date of entry into force of this Agreement, and these goods shall be duty-free, effective January 1 of year 8.

When you review Annex 2A, refer back to this reference on the staging categories. Also, where duties are eliminated according to Categories B, C, D or S, the starting point is the MFN rate of duty that applied on June 9, 2009.  When reviewing Canada’s Annex 2-A commitments for tariff elimination, refer to the Customs Tariff 2015 tariff codes.  This is when the Canada-EU CETA tariff elimination provisions were negotiated/finalized and the negotiators were using these H.S. Codes.

There are special rules relating to quotas for EU-origin cheese imported into Canada (other quotas are for imports into the EU). We will discuss cheese quotas in another post.

For more information about the Canada-EU CETA, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  We have posted articles and presentations about the Canada-EU CETA on the LexSage web-site.

Canada Commences Consultations Regarding A Canada-China Free Trade Agreement

Posted in Agriculture, Antidumping, Border Security, Canada's Federal Government, Canada-China FTA, Corporate Counsel, Cross-border deals, Cross-border litigation, Cross-Border Real Estate, Cross-border trade, Customs Law, Energy, Environment, Export Controls & Economic Sanctions, Government Procurement, Immigration law, Imports Restrictions, Intellectual Property, International Arbitrations, Labour, origin, tariff classification, valuation

Business team on top of the globe. European and African side. Conceptual business illustration. Isolated

On March 4, 2017, Global Affairs Canada announced consultations concerning a possible free trade agreement between Canada and China.   Consultations means that Global Affairs Canada is consulting with Canadian interested stakeholders (the free trade agreement negotiations have not started yet – Canada is in a preliminary exploratory stage). Global Affairs Canada has posted information on the consultations. The Canadian public and interested Canadian stakeholders may make submissions until June 2, 2017.  There is an online consultation form. It is also helpful to read the Canada Gazette Notice concerning the consultations.

Canadian stakeholders would include Canadian businesses and Canadian subsidiaries of U.S. companies (and other foreign companies), business associations, experts/academics, civil society and NGOs, labour unions, provincial/territorial and local governments, individuals (including, indigenous peoples, youths, students) and others who are interested.  What U.S. companies cannot do directly from the United States, may be accomplished indirectly through Canadian legal entities.

Canadian entities interested in a free trade agreement with China and those who have concerns have an opportunity to communicate with the people who will comprise a Canadian negotiating team. The focus of consultations is to determine how Canada should best proceed regarding a possible FTA with China.  The negotiators need the assistance of Canadian businesses to know (1) what rates of duty they pay on goods that they export to China (e.g., what goods should be in Canada’s market access ask), (2) whether Canadian goods exported to China are subject to quantitative restrictions or quotas or other restrictions that prevent access to China’s market, (3) what technical barriers to trade they experience when exporting to China (e.g.,  what inspection processes delay market access, what fees must be paid in China, which standards/certification requirements impede market access, etc.), (4) which categories of service providers are active in China (what should be Canada’s market access ask for services), (5) what approval processes/certification requirements impede access to Canadian service providers,  (6) which categories of Canadian service providers would like greater labour mobility, (7) whether China’s intellectual property rules impede market access and/or negatively affect Canadian businesses in China (the Canadian Government has significant knowledge about China’s intellectual property issues, but may not know all the problems experienced by Canadian businesses in China), (8) what Chinese government departments (at the federal, province and local levels) Canadian businesses sell goods and services which should be included in government procurement schedules, (9) whether Canadian companies doing business in China and/or Canadian individuals have experienced a lack of transparency or certainty in outcome in legal proceedings and what areas of China’s legal process need improvement, and (10) any other issues Canadian stakeholders would like addressed in the free trade agreement negotiations, etc.

The Canada Gazette Notice goes further than my list to include the following:

  • Trade and investment interests:
    • Canadian goods of export or import interest (identified by HS/Tariff codes) that would benefit from expedited or phased-in removal of tariffs and other barriers by China or Canada;
    • Trade in services (identification of sectors, activities of export interest for Canadian service providers, market access barriers and domestic regulatory measures that either restrict or affect their ability to conduct business or deliver their service in China);
    • Temporary entry of business people from Canada into China and from China into Canada (e.g. any impediments when entering China, or Canada, to work on a temporary basis);
    • Electronic commerce (e.g. restrictive measures faced by Canadian suppliers of digital products and services in China);
    • Non-tariff barriers (such as import licensing, administration of tariff-rate quotas, taxes, lack of transparency), technical barriers to trade (including technical regulations, standards or conformity assessment procedures), and sanitary and phytosanitary measures;
    • Rules of origin, including the appropriate rules of origin for specific products or sectors;
    • Border and customs issues that have an impact on the movement of commercial goods into and out of China;
    • Investment barriers faced by Canadian investors in China, including restrictions imposed on foreign ownership or entry to market, questions of transparency of regulation and performance requirements;
    • Priority government procurement markets for Canadian suppliers in China at the central, provincial and local levels, the goods and services that Canadian suppliers are interested in selling to those government organizations, and barriers faced when selling or attempting to sell to governments in China;
    • Any incident affecting business practices when interacting with Chinese state-owned enterprises (in Canada or in China);
    • China’s application and enforcement of intellectual property (IP) laws, regulations, policies or procedures that may result in discrimination against foreign intellectual property, and any requirements for the sharing or transfer of IP or confidential business information;
    • Competition policy matters, including competition law enforcement or other measures affecting competition in China;
    • Preferred approach to trade remedies taken on trade between China and Canada; and
    • Any incidents of unfair business practices.

 

  • Reflection of the interests and values of Canadians:
    • Sustainable development;
    • Corporate social responsibility;
    • Transparency;
    • Equality;
    • Good governance;
    • Rule of law;
    • Non-discrimination;
    • Respect for the environment;
    • Culture;
    • Labour rights; and
    • Human rights;

 

  •  Enhancement of the bilateral economic relationship:
    • Co-operation on science and technology;
    • Climate change; Cultural and creative industries; and
    • Health and the environment.
  • Other topics:
    • Risks to Canadian consumers and to Canada’s plant and animal resource base resulting from the import of goods from China; and
    • Any other topics of interest or potential concern to Canadians related to a potential free trade agreement.

A number of areas of the economy will have an interest in the Canada-China Free Trade Agreement, including, without limitation, academia/education, agriculture and agri-food, autos and auto parts, energy, financial services, ICT, infrastructure, mining, legal services, accounting services, engineering services, telecommunications, steel, and water.

For more information about Canada-China trade, please contact Cyndee Todgham Cherniak at 416-3407-4168 or at Cyndee@LexSage.com. Cyndee was a director of the Canada China Business Counsel for over 7 years.  The Canada China Business Council prepared a report concerning a possible free trade agreement with China.  For more information about Canadian trade law, please go to the LexSage web-site.

 

Canada-Ukraine Free Trade Agreement Implementation Act Passes Second Reading In Canada’s Senate

Posted in Canada's Federal Government, Canada-Ukraine FTA, Cross-border trade, Customs Law

Cyrstal Ball MoneyOn March 7, 2017, BillC-31 “An Act to implement the Free Trade Agreement between Canada and Ukraine passed second reading in Canada’s Senate.  Bill C-31 is now being reviewed by the Senate of Canada Standing Committee on Foreign Affairs and International Trade.  After the Report is prepared by the Standing Committee on Foreign Affairs and International Trade, Bill C-31 returns to the Senate for third reading and debate.  After third reading, the Canada-Ukraine Free Trade Agreement (“Canada-Ukraine FTA”) can be ratified.

Canada has agreed to reduce most customs duty rates to “free” or 0% immediately upon implementation on goods that meet the rules of origin.  Pursuant to Chapter 2 of the Canada-Ukraine FTA, each party shall reduce or eliminate customs duties on goods originating in either party in accordance with the tariff elimination schedules in Annex 2-B.  In Article 1 of Annex 2-B, Canada agrees to eliminate customs duties on all goods in Chapters 1-97 of the Harmonized System that provides for Most-Favoured-Nation rate of duty, with the exception of any goods Canada has listed in Annex 2-B (which is a short list).

We have prepared the following chart, which sets out the H.S. Chapters and Canada’s commitments to reduce customs duties when the Canada-Ukraine FTA enters into force:

H.S. Chapter Description 2016 MFN Rate of Duty In Canada What Canada’s Schedule Says
1 Live animals Up to 238% Some items duty free immediately

 

Some items excluded from duty relief

2 Meat and edible meat offal Up to 249% Some items duty free immediately

 

Some items excluded from duty relief

3 Fish and crustaceans, mollusks and other aquatic invertebrates Up to 5% Entire Chapter is duty free immediately
4 Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere specified or included Up to 313.5%

 

Some items duty free immediately

 

Some items excluded from duty relief

5 Products of animal origin, not elsewhere specified or included Free Entire Chapter is duty free
6 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage Up to 16% Entire Chapter is duty free immediately
7 Edible vegetables and certain roots and tubers Up to  $10.31/kg Entire Chapter is duty free immediately
8 Edible fruit and nuts; peel of citrus fruit or melons Up to 14.5% Entire Chapter is duty free immediately
9 Coffee, tea, maté and spices Up to 3% Entire Chapter is duty free immediately
10 Cereals Up to 94.5% Entire Chapter is duty free immediately
11 Products of the milling industry; malt; starches; inulin; wheat gluten Up to $397.30/tonne Entire Chapter is duty free immediately
12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder Up to 10% Entire Chapter is duty free immediately
13 Lac; gums, resins and other vegetable saps and extracts Free Entire Chapter is duty free
14 Vegetable plaiting materials; vegetable products not elsewhere specified or included Free Entire Chapter is duty free
15 Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes Up to 218%

 

Some items duty free immediately

 

Some items excluded from duty relief

16 Preparations of meat, of fish or of crustaceans, mollusks or other aquatic invertebrates Up to 253% Some items duty free immediately

 

Some items excluded from duty relief

17 Sugars and sugar confectionery Up to $30.86/tonne Some items duty free immediately

 

Some items excluded from duty relief

18 Cocoa and cocoa preparations Up to 265% Some items duty free immediately

 

Some items excluded from duty relief

19 Preparations of cereals, flour, starch or milk; pastry cooks’ products Up to 267.5% Some items duty free immediately

 

Some items excluded from duty relief

20 Preparations of vegetables, fruit, nuts or other parts of plants Up to 17% Entire Chapter is duty free immediately
21 Miscellaneous edible preparations Up to 277% Some items duty free immediately

 

Some items excluded from duty relief

22 Beverages, spirits and vinegar Up to 11% Some items duty free immediately

 

Some items excluded from duty relief

23 Residues and waste from the food industries; prepared animal fodder Up to 205.5% Some items excluded from duty relief
24 Tobacco and manufactured tobacco substitutes Up to 13% Entire Chapter is duty free immediately
25 Salt; sulphur; earths and stone; plastering materials, lime and cement Up to 2.5% Entire Chapter is duty free immediately
26 Ores, slag and ash Free Entire Chapter is duty free immediately
27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes Up to 12.5% Entire Chapter is duty free immediately
28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes Up to 6.5% Entire Chapter is duty free immediately
29 Organic chemicals Free Entire Chapter is duty free
30 Pharmaceutical products Up to 6.5% Entire Chapter is duty free immediately
31 Fertilizers Free Entire Chapter is duty free
32 Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter; paints and varnishes; putty and other mastics; inks Up to 6.5% Entire Chapter is duty free immediately
33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations Up to 8% Entire Chapter is duty free immediately
34 Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, “dental waxes” and dental preparations with a basis of plaster Up to 6.5% Entire Chapter is duty free immediately
35 Albuminoidal substances; modified starches; glues; enzymes Up to 270% Some items duty free immediately

 

Some items excluded from duty relief

36 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations Up to 6.5% Entire Chapter is duty free immediately
37 Photographic or cinematographic goods Up to 6.5% Entire Chapter is duty free immediately
38 Miscellaneous chemical products Up to 15.5% Entire Chapter is duty free immediately
39 Plastics and articles thereof Up to 6.5% Entire Chapter is duty free immediately
40 Rubber and articles thereof Up to 15.5% Entire Chapter is duty free immediately
41 Raw hides and skins (other than fur-skins) and leather Free Entire Chapter is duty free
42 Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut) Up to 15.5% Entire Chapter is duty free immediately
43 Fur-skins and artificial fur; manufactures thereof Up to 15.5% Entire Chapter is duty free immediately
44 Wood and articles of wood; wood charcoal Up to 9.5% Entire Chapter is duty free immediately
45 Cork and articles of cork Free Entire Chapter is duty free
46 Manufactures of straw, of esparto or of other plaiting materials; basket-ware and wickerwork Up to 11% Entire Chapter is duty free immediately
47 Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard Free Entire Chapter is duty free
48 Paper and paperboard; articles of paper pulp, of paper or of paperboard Free Entire Chapter is duty free
49 Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans Free Entire Chapter is duty free
50 Silk Free Entire Chapter is duty free
51 Wool, fine or coarse animal hair; horsehair yarn and woven fabric Free Entire Chapter is duty free
52 Cotton Up to 8% Entire Chapter is duty free immediately
53 Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn Free Entire Chapter is duty free
54 Man-made filaments; strip and the like of man-made textile materials Up to 8% Entire Chapter is duty free immediately
55 Man-made staple fibres Up to 8% Entire Chapter is duty free immediately
56 Wadding, felt and non-wovens; special yarns; twine, cordage, ropes and cables and articles thereof Up to 16% Entire Chapter is duty free immediately
57 Carpets and other textile floor coverings Up to 14% Entire Chapter is duty free immediately
58 Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery Free Entire Chapter is duty free
59 Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use Up to 18% Entire Chapter is duty free immediately
60 Knitted or crocheted fabrics Free Entire Chapter is duty free
61 Articles of apparel and clothing accessories, knitted or crocheted Up to 18% Entire Chapter is duty free immediately
62 Articles of apparel and clothing accessories, not knitted or crocheted Up to 18% Entire Chapter is duty free immediately
63 Other made up textile articles; sets; worn clothing and worn textile articles; rags Up to 18% Entire Chapter is duty free immediately
64 Footwear, gaiters and the like; parts of such articles Up to 20% Entire Chapter is duty free immediately
65 Headgear and parts thereof Up to 15.5% Entire Chapter is duty free immediately
66 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof Up to 7.5% Entire Chapter is duty free immediately
67 Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair Up to 15.5% Entire Chapter is duty free immediately
68 Articles of stone, plaster, cement, asbestos, mica or similar materials Up to 15.5% Entire Chapter is duty free immediately
69 Ceramic products Up to 8% Entire Chapter is duty free immediately
70 Glass and glassware Up to 6.5% Entire Chapter is duty free immediately
71 Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof; imitation jewelry; coin Up to 8.5% Entire Chapter is duty free immediately
72 Iron and steel Free Entire Chapter is duty free
73 Articles of iron or steel Up to 8% Entire Chapter is duty free immediately
74 Copper and articles thereof Up to 9.5% Entire Chapter is duty free immediately
75 Nickel and articles thereof Up to 3% Entire Chapter is duty free immediately
76 Aluminum and articles thereof Up to 6.5% Entire Chapter is duty free immediately
77 (reserved for possible future use)
78 Lead and articles thereof Free Entire Chapter is duty free
79 Zinc and articles thereof Up to 3% Entire Chapter is duty free immediately
80 Tin and articles thereof Up to 3% Entire Chapter is duty free immediately
81 Other base metals; cermets; articles thereof Free Entire Chapter is duty free
82 Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal Up to 11% Entire Chapter is duty free immediately
83 Miscellaneous articles of base metal Up to 7% Entire Chapter is duty free immediately
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof Up to 9% Entire Chapter is duty free immediately
85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Up to 9% Entire Chapter is duty free immediately
86 Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signalling equipment of all kinds Up to 11%

 

Entire Chapter is duty free immediately
87 Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof Up to 13% Some items duty free immediately

 

Some items customs duties reduced over 8 years

88 Aircraft, spacecraft, and parts thereof Up to 15.5% Entire Chapter is duty free immediately
89 Ships, boats and floating structures Up to 25% Entire Chapter is duty free immediately
90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof Up to 8.5% Entire Chapter is duty free immediately
91 Clocks and watches and parts thereof Up to 14% Entire Chapter is duty free immediately
92 Musical instruments; parts and accessories of such articles Up to 7% Entire Chapter is duty free immediately
93 Arms and ammunition; parts and accessories thereof Up to 7.5% Entire Chapter is duty free immediately
94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings Up to 15.5% Entire Chapter is duty free immediately
95 Toys, games and sports requisites; parts and accessories thereof Up to 8% Entire Chapter is duty free immediately
96 Miscellaneous manufactured articles Up to 8% Entire Chapter is duty free immediately
97 Works of art, collectors’ pieces and antiques Up to 7% Entire Chapter is duty free immediately

There are other restrictions such as quotas and rules of origin that must be considered.

The Canada-Ukraine FTA should be in effect soon after ratification by Canada.  Canadian importers should start to consider what opportunities are available to import goods originating in Ukraine on a duty free basis.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.  For more information about Canada’s customs laws and the Canada-Ukraine FTA, please go to the LexSage web-site.

Canada-EU CETA Implementation Act Passes Second Reading In Canada’s Senate

Posted in Canada-EU CETA

CETAOn March 7, 2017, Bill C-30 “An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures passed second reading in Canada’s Senate.  Bill C-30 is now being reviewed by the Senate of Canada Standing Committee on Foreign Affairs and International Trade.  After the Report is prepared by the Standing Committee on Foreign Affairs and International Trade, Bill C-30 returns to the Senate for third reading and debate.  After third reading, the Canada-European Union Comprehensive Economic and Trade Agreement (“Canada-EU CETA”) can be ratified.

On February 15, 2017, the Canada-EU CETA was ratified by the European Parliament.  This means that as soon as Canada ratifies the Canada-EU CETA, the market access provisions may be provisionally implemented.  The Canada-EU CETA covers virtually all sectors and aspects of Canada-EU trade.  Provisional implementation means greater market access.  Most customs duty rates will reduce to “free” or 0%.

According to Article 30.7 of the Canada-EU CETA, the Agreement can enter into force on the first day after the month of ratification by the parties. If the Senate passes Bill C-30 at third reading in March 2017 and Canada ratifies the Canada-EU CETA in March 2017, it is possible that the Canada-EU CETA will be provisionally implemented as at April 1, 2017.

Pursuant to Chapter 2 of the Canada-EU CETA, each party shall reduce or eliminate customs duties on goods originating in either party in accordance with the tariff elimination schedules in Annex 2-A.  The staging categories for Schedule 2-A are as follows:

  • Category A – duties on originating goods shall be eliminated on the date this Agreement enters into force;
  • Category B- duties on originating goods shall be removed in four equal stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year 4;
  • Category C – duties on originating goods in a Party’s Schedule shall be removed in six equal stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year 6;
  • Category D – duties on originating goods in a Party’s Schedule shall be removed in eight equal stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year 8;
  • Category E  – duties on originating goods are exempt from tariff elimination in a Party’s Schedule are exempt from tariff elimination;
  • Category S – duties on originating goods shall be removed in three equal stages beginning on the fifth anniversary of the date of entry into force of this Agreement, and these goods shall be duty-free, effective January 1 of year 8; and
  • Category AVo+EP – the ad valorem component of the customs duties on originating goods shall be eliminated upon the date of entry into force of this Agreement; the tariff elimination shall apply to the ad valorem duty only; the specific duty resulting from the entry price system applicable for these originating goods shall be maintained.

When you review Annex 2A, refer back to this reference on the staging categories. Also, where duties are eliminated according to Categories B, C, D or S, the starting point is the MFN rate of duty that applied on June 9, 2009.  When reviewing Canada’s Annex 2-A commitments for tariff elimination, refer to the Customs Tariff 2015 tariff codes.  This is when the Canada-EU CETA tariff elimination provisions were negotiated/finalized and the negotiators were using these H.S. Codes.

Most goods become duty free upon provisional application.  Belgian and Spanish chocolate will become duty free upon importation into Canada at the time of provisional implementation.  I can hardly wait.  Most products that are not agri-food, fish/seafood or automotive become duty free upon entry into Canada.

The Government of Canada has posted a helpful chart.

For more information about the Canada-EU CETA, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  We have posted articles and presentations about the Canada-EU CETA on the LexSage web-site.

Canadian House of Commons Approves Canada-EU CETA Implementation Act at Third Reading

Posted in Canada-EU CETA, Trade Agreeements

CETAOn February 14, 2017, the Canadian House of Commons passed Bill C-30 “An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures at Third Reading. There were three days of debates at third reading on February 8, 2017, February 13, 2017 and February 14, 2017.  Bill C-30 moves to the Canadian Senate.  This is good news as Prime Minister Trudeau is leaving for Europe to witness and celebrate the ratification of the Canada-European Union Comprehensive Economic and Trade Agreement by the European Union.

According to Article 30.7(2), the Canada-EU CETA will “enter into force on the first day of the second month following the date the Parties exchange written notifications certifying that they have completed their respective internal requirements and procedures or on such other date as the Parties may agree.”  What this means is that the CETA will enter into force one month after the Senate passes Bill C-30 and the Government of Canada sends the formal written notification of ratification.

All eyes will be on the Senate to move quickly.  Assuming the Senate can work quickly (no pressure), the Canada-EU CETA can enter into force in the Spring of 2017.  Article 30.7(3) allows for provisional implementation of CETA “from the first day of the month following the date on which the Parties have notified each other that their respective internal requirements and procedures necessary for the provisional application of this Agreement have been completed or on such other date as the Parties may agree.”  What this means is that CETA can have provisional application up to a month earlier.  So, if the Senate passes Bill C-30 in March 2017 and the Government of Canada ratifies CETA in March 2017, provisional application can start on April 1, 2017.