The Government of Canada posted a Notice to Exporters (No. 211) “Vehicles for Export to the European Union and Its Member States (Item 5210 of Canada’s Export Control List)” (dated May 25, 2017) in which the rules for monitoring Canada-EU Comprehensive Economic and Trade Agreement (“Canada-EU CETA”) new vehicle quotas (for exports to the EU) are outlined. I downloaded and printed the Notice to Exporters on July 18, 2017. The Notice to Importers was not available on July 19, 2017 and appears to have been taken down. That does not surprise me because the Canada-EU CETA will not come into effect until September 21, 2017. I understand that the Notice to Exporters will be revised and posted in August. Corrections will be made, including the June 15, 2017 to December 31, 2017 origin quota period and the 54,795 vehicles quota for 2017. That being said, it can be assumed that the quota allocation and process will be similar and parties can get ready with the advance knowledge. It will also be important to watch for the revised and restated Notice to Exporters.
The Canada-EU CETA establishes an annual origin quota of 100,000 duty-free Canadian-origin vehicle sales from Canada to the EU. The origin quota is located in Annex 5-A “Origin quotas and alternatives to product specific rules of origin”, Section D. Vehicles exported as part of this 100,000 vehicle quota need only meet a 20% rule of origin requirement. Vehicles exported outside of the quota may enter the EU under the preferential duty rates but only if they meet a higher rule of origin content requirement (50%). The H.S. Codes set out in Table D include 8703.21, 8703.22, 8703.23, 8703.24, 8703.31, 8703.32, 8703.33, 8703.99. Note 1 and Note 2 relate to cumulation with U.S.-origin (non-originating parts) parts and value.
The Notice to Exporters is interesting and gives useful information:
- According to the Notice to Exporters, the allocation policy divides the quota into two pools. Pool 1 (50,000 vehicles) is allocated on an equal share basis between interested eligible applicants. Pool 2 (50,000 vehicles) is available for allocation to eligible applicants with an EU-market export program.
- Pool 2 allocation holders can apply for additional quota if they can demonstrate they are close to exhausting the allocation they have been granted.
- Only manufacturers of light passenger vehicles in Canada are eligible to obtain CETA vehicle origin quota export permits (Both Pool 1 and Pool 2).
- Light passenger vehicle manufacturers who want origin quota need to apply prior to the Canada-EU CETA implementation date of September 21, 2017. While the Notice to Exporters sets a June 12, 2017 deadline, it is reasonable to expect that a new deadline will be announced in an amended and restated Notice to Exporters.
- Pool 2 allocations must be supported with a three year forecast of quota necessary to accommodate the company’s export program. The quota allocations will be valid until December 31, 2020 & companies must submit monthly export reports.
- The Notice to Exporters is silent about how unused origin quota will be reallocated.
- The Government of Canada will monitor exports of duty-free vehicles under the Export and Import Permits Act. Exports of vehicles under the CETA origin quota program will be subject to export controls. Exporters must obtain an export permit for the vehicles being sent to the European Union under the origin quota/duty-free quota.
- A shipment-specific export permit must be obtained for each shipment.
- The quota year (except for 2017), will extend from January 1 to December 31, inclusive.
- The vehicles must satisfy the Canada-EU CETA rules of origin (either the product specific rules of origin (20% originating content) or the origin quotas and alternatives to the product-specific rules of origin). The Canada-EU CETA rules of origin for vehicles is 50% unless the vehicles are exported as part of the quota, in which case the RVC need only be 20%.
- The exporter must provide an export declaration of origin. The export permit is not sufficient.
For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at email@example.com.