Question In Maze Showing Confusion And Puzzled

Canadian importers may be able to import EU-origin goods from the United States and claim Canada-EU CETA preferential tariff rates IF the EU-origin goods have not been further manufactured in the United States AND entered a customs bonded warehouse upon importation into the United States and were not released from the customs bonded warehouse prior to shipment to Canada.

Article 14 of the Protocol on rules of origin and origin procedures of the Canada-EU CETA contains the applicable rule:

“1. A product that has undergone production that satisfies the requirements of Article 2 shall be considered originating only if, subsequent to that production, the product:

(a) does not undergo further production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the product to the territory of a Party; and

(b) remains under customs control while outside the territories of the Parties (being EU countries and Canada).

2. The storage of products and shipments or the splitting of shipments may take place where carried out under the responsibility of the exporter or of a subsequent holder of the products and the products remain under customs control in the country or countries of transit.”

What this means is that it is that if a good is of EU-origin (e.g., french cosmetics) and it is imported into the United States from France, but is not is a customs warehouse in the USA, the good will be subject to duty at the MFN rate.  However, if the U.S. company stores the goods in a bonded warehouse or customs warehouse (and does not undertake any processing with respect to the good), it may enter Canada under the CEUT tariff rate.  It will be important to have evidence that the EU-origin goods were stored in a customs warehouse in the United States.

It is important to note that the Canada-EU CETA does not have the same prohibition on transshipment that is found in Article 411 of NAFTA.

If you have any questions, please contact Cyndee Todgham Cherniak at 416-307-4168 or email cyndee@lexsage.com.  For more information about the Canada-EU CETA, please go to the LexSage website.