Vol. 143, No. 14 — July 8, 2009

Registration

SOR/2009-198 June 18, 2009

CUSTOMS TARIFF

CEFTA Rules of Origin Regulations

P.C. 2009-1037 June 18, 2009

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 16(2) (see footnote a) of the Customs Tariff  (see footnote b), hereby makes the annexed CEFTA Rules of Origin Regulations.

CEFTA RULES OF ORIGIN REGULATIONS

RULES OF ORIGIN

1. The following provisions of Annex C to the version of the Free Trade Agreement between Canada and the States of the European Free Trade Association (Iceland, Liechtenstein, Norway, Switzerland), signed on January 26, 2008, have the force of law in Canada:

(a) Articles 1 to 8;

(b) Article 9, paragraph 1;

(c) Articles 10 to 12;

(d) Article 14; and

(e) Appendix I.

COMING INTO FORCE

2. These Regulations come into force on July 1, 2009, but if they are registered after that day, they come into force on the day they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue

The Canada-European Free Trade Association Free Trade Agreement (CEFTA) was signed on January 28, 2008 and the Canada-European Free Trade Association Free Trade Agreement Implementation Act (Bill C-2) received Royal Assent on April 29, 2009. Regulations are also necessary to fully implement the CEFTA in Canada. The European Free Trade Association (EFTA) countries (Iceland, Norway, Switzerland and Liechtenstein) recently completed their domestic procedures and the CEFTA is scheduled to come into force on July 1, 2009.

Objectives

When implementing free trade agreements in Canada, a Bill and associated regulations are necessary to implement commitments into the Canadian legal framework. As such, these regulations are required to fully implement Canada’s obligations under the CEFTA.

Description

The Canada-European Free Trade Association Free Trade Agreement (CEFTA) Rules of Origin Regulations implement, in Canada, the rules of origin negotiated by Canada and EFTA, which will be used to determine when goods have undergone sufficient production to qualify for preferential tariff treatment under the CEFTA. Preferential tariff treatment under the CEFTA, which reflects the actual reduction in specific rates of duty, has been implemented in the Customs Tariff through Bill C-2.

The Canada-European Free Trade Association Free Trade Agreement (CEFTA) Rules of Origin for Casual Goods Regulations set out the origin requirements for low-value shipments and for goods imported by travelers to ensure that eligible goods qualify without onerous documentation requirements.

The Canada-European Free Trade Association Free Trade Agreement (CEFTA) Tariff Preference Regulations allow eligible goods that are not shipped directly between an EFTA country and Canada to retain their eligibility for preferential tariff rates provided goods remain under customs control in third countries.

Regulatory and non-regulatory options considered

Implementation of these regulations is necessary to fulfill Canada’s obligations under CEFTA. There are no practical alternatives to fully implement the free trade agreement. Regulations made pursuant to subsection 16(2) of the Customs Tariff are the appropriate mechanisms.

Benefits and costs

These regulations are necessary to fully implement Canada’s commitments under the CEFTA. In 2008, two-way merchandise trade with the EFTA countries was valued at $13.3 billion. Canadian exports were valued at $4.2 billion and included nickel, precious stones and metals, pharmaceuticals, base metals and mechanical machinery. Canadian imports were valued at $9.1 billion and included mineral fuels, pharmaceuticals, organic chemicals, mechanical machinery, and scientific and precision instruments.

Based on current trading patterns, it is estimated that, under the CEFTA, the annual duties foregone by the Government would be approximately $31 million. However, the removal of tariffs in Canada will lower the costs to Canadian importers of EFTA-originating products. With the removal of tariffs in Canada, increased imports from EFTA could be expected, thus potentially leading to enhanced customs duty savings by Canadian importers. Moreover, the removal of tariffs in the EFTA markets should help Canadian exporters further penetrate those markets, potentially leading to increased exports. Reduction of tariffs on Canadian exports would help make Canadian goods more competitive in a range of sectors including agriculture and agri-food products, forest products, pulp and paper products, manufactured housing, aluminum, cosmetics and motor vehicles. More broadly, the CEFTA will help remove barriers that limit Canadian participation in these wealthy and sophisticated markets and provide Canadian exporters with increased access to an important entry point to the broad European market.

Rationale

These Regulations are necessary to fully implement Canada’s commitments under the CEFTA. The CEFTA was signed on January 26, 2008 and Bill C-2 implementing the CEFTA in Canada received Royal Assent on April 29, 2009. More specifically, the Regulations link the preferential tariff treatment provided for under the CEFTA, and implemented in the Customs Tariff by Bill C-2, with the rules of origin necessary to determine whether goods qualify for that preferential tariff treatment.

Canada has already implemented similar regulations for purposes of its other bilateral and regional free trade agreements, including the North American Free Trade Agreement, the Canada-Chile FTA, the Canada-Israel FTA and the Canada-Costa Rica FTA.

Consultation

The Government of Canada announced the launch of negotiations with the EFTA countries on October 9, 1998, following extensive consultations to seek the views of the Canadian manufacturers, importers and exporters on all FTA negotiation-related issues, including rules of origin. These consultations revealed that a free trade agreement with EFTA was supported by a broad cross-section of stakeholders.

Stakeholders were kept informed of developments throughout the nearly ten years of FTA negotiations, including on rules of origin issues. These continuous consultations were held by various means including federal/provincial/territorial meetings, government-industry meetings and more specific discussions with particular groups of stakeholders. In particular, the Canadian shipbuilding industry was consulted extensively prior to and during negotiations, including up to the conclusion of the negotiations on June 7, 2007. The rules of origin resulting from the FTA negotiations reflect the views and interests of all stakeholders. Subsequently, Canada signed the CEFTA on January 26, 2008.

Implementation, enforcement and service standards

The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of these regulations in the normal course of its administration of customs and tariff-related legislation and regulations. As in the case of previous free trade agreements, the CBSA will update its systems to account for the implementation in Canada of the CEFTA and will inform importers of all relevant CEFTA-related issues pertaining to these regulations.

Contact

Colleen Brock
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Telephone: 613-996-5470

Footnote a
S.C. 2001, c. 28, s. 34(1)

Footnote b
S.C. 1997, c. 36

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