EXTRA Vol. 151, No. 1

Canada Gazette

Part Ⅱ

OTTAWA, THURSDAY, SEPTEMBER 7, 2017

Registration

SOR/2017-175 September 1, 2017

CUSTOMS TARIFF

CETA Rules of Origin Regulations

P.C. 2017-1124 August 31, 2017

His 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), makes the annexed CETA Rules of Origin Regulations.

CETA Rules of Origin Regulations

Rules of Origin

1 The following provisions of the Protocol on Rules of Origin and Origin Procedures of the Canada–European Union Comprehensive Economic and Trade Agreement have the force of law in Canada:

  • (a) Articles 1 and 2;
  • (b) paragraphs 1 to 3 of Article 3;
  • (c) Articles 4 to 17; and
  • (d) Annexes 1, 4, 5, 5-A and 7.

Coming into Force

2 These Regulations come into force on the day on which section 97 of the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act, chapter 6 of the Statutes of Canada, 2017, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations or the Order.)

Issues

In order to implement the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act was introduced in the House of Commons on October 31, 2016, and received royal assent on May 16, 2017. In addition to the implementing Act, a number of associated regulations and orders are necessary to fully implement Canada’s tariff commitments under the CETA into the Canadian legal framework.

Background

The Prime Minister, along with the President of the European Council and the President of the European Commission signed the CETA during the European Union-Canada Leaders’ Summit on October 30, 2016. On July 8, 2017, the Prime Minister and the President of the European Commission announced that provisional application of the agreement will come into effect on September 21, 2017. When implementing free trade agreements in Canada, legislation and associated regulations and orders are necessary to enact an agreement’s commitments in the Canadian domestic legal framework.

In 2016, bilateral merchandise trade between Canada and the European Union (EU) totalled $101 billion (10% of total Canadian two-way merchandise trade with the world), with Canadian exports accounting for $40 billion and imports totalling $61 billion. Key goods traded bilaterally include machinery and equipment, precious metals, motor vehicles and parts, pharmaceuticals, and aircraft and parts. When Canada’s tariff commitments under the CETA are fully implemented, it is estimated that annual duties foregone by the Government would be approximately $860 million based on recent trade patterns with current EU Member States. These duties represent a benefit, in the form of lower customs duties to be paid by Canadian importers of EU-originating products. The removal of EU tariffs on Canadian exports will similarly make Canadian goods more competitive in the European market, potentially leading to increased exports across a range of sectors.

Objectives

The objective of these regulations and Order is to fully implement Canada’s tariff commitments under the CETA so that Canada and the EU can proceed with implementation of the Agreement.

Description

The Regulations Defining “EU country or other CETA beneficiary” define the term “EU country or other CETA beneficiary” that is used in the Customs Tariff and several other statutes to identify the countries/territories that benefit from the CETA.

The Order Amending the Schedule to the Customs Tariff (Extension of the Canada-European Union Tariff) extends entitlement to CETA preferential tariff to goods that originate in the countries/territories specified in the Order. The countries/territories listed are the same countries/territories specified in the Regulations above.

The following three regulations link the preferential tariff treatment provided for under the CETA, and implemented in the Customs Tariff by the implementing Act, with the rules of origin necessary to determine whether the goods qualify for preferential tariff treatment. The regulations are entirely non-discretionary in nature as they reflect the negotiated outcome of the CETA. They are also similar to changes made to implement tariff-related provisions in Canada’s other free trade agreements (e.g. the Canada-Honduras Free Trade Agreement, the Canada-Korea Free Trade Agreement):

  • The CETA Rules of Origin Regulations are designed to implement, in Canada, the rules of origin negotiated by Canada and the EU under the CETA that will be used to determine when goods have undergone sufficient production to qualify for preferential tariff treatment.
  • The CETA Rules of Origin for Casual Goods Regulations establish the conditions under which goods acquired in the EU by travellers are considered originating and therefore entitled to preferential tariff treatment in Canada. Where travellers acquire goods in the EU that are either marked as made in the EU, or not marked to the contrary, the traveller will be able to claim the CETA tariff preference on importation of the goods into Canada.
  • The CETA Tariff Preference Regulations allow eligible goods that are not shipped directly between the EU and Canada to retain the eligibility for preferential tariff rates provided the goods remained under customs control in third countries.

“One-for-One” Rule

The “One-for-One” Rule does not apply to these regulations and this Order, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to these regulations and this Order as there are no costs imposed on business.

Consultation

In December 2008, the Government of Canada launched public consultations with provinces and territories, businesses, industry associations and the general public to gauge Canadians’ interests and sensitivities in launching free trade negotiations with the EU. Stakeholders were regularly consulted throughout the negotiations, including on issues concerning tariffs and rules of origin. A free trade agreement with the EU is supported by a broad cross-section of Canadian business stakeholders.

These regulations and this Order were published in the Canada Gazette, Part I, on July 15, 2017, followed by a 15-day comment period. There were no submissions received.

Rationale

These regulations and this Order are necessary to fulfill Canada’s tariff commitments under the CETA so that Canada and the EU can proceed with implementation of the Agreement.

Implementation, enforcement and service standards

The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of these regulations and this Order 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 CETA and will inform importers of all relevant CETA-related issues pertaining to these regulations and Order.

Contact

Brad Norwood
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Telephone: 613-369-4039