Order Amending the Schedule to the Customs Tariff (CPTPP): SOR/2019-292

Canada Gazette, Part II, Volume 153, Number 17

Registration

SOR/2019-292 August 8, 2019

CUSTOMS TARIFF

P.C. 2019-1137 August 7, 2019

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to paragraph 14(1)(c) of the Customs Tariff footnote a, makes the annexed Order Amending the Schedule to the Customs Tariff (CPTPP).

Order Amending the Schedule to the Customs Tariff (CPTPP)

Amendments

1 The List of Tariff Provisions set out in the schedule to the Customs Tariff footnote 1 is amended as set out in the schedule to this Order.

Application

2 This Order does not apply to goods that originate in a CPTPP country and which are in transit to Canada on the day on which this Order comes into force.

Coming into Force

3 This Order comes into force on the day on which it is registered.

SCHEDULE

(Section 1)

Amendments to the List of Tariff Provisions

1 Tariff item No. 4011.90.90 is amended by replacing

2 Tariff item No. 5704.20.00 is amended by replacing

3 Tariff item No. 8702.20.10 is amended by replacing

4 Tariff item No. 8702.20.20 is amended by replacing

5 Tariff item No. 8702.30.10 is amended by replacing

6 Tariff item No. 8702.30.20 is amended by replacing

7 Tariff item No. 8702.40.10 is amended by replacing

8 Tariff item No. 8702.40.20 is amended by replacing

9 Tariff item No. 8703.40.10 is amended by replacing

10 Tariff item No. 8703.40.90 is amended by replacing

11 Tariff item No. 8703.50.00 is amended by replacing

12 Tariff item No. 8703.60.10 is amended by replacing

13 Tariff item No. 8703.60.90 is amended by replacing

14 Tariff item No. 8703.70.00 is amended by replacing

15 Tariff item No. 8703.80.00 is amended by replacing

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the orders.)

Issues

A technical error with the implementation of tariff commitments from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or “the Agreement”) resulted in 15 tariff items being assigned the incorrect staging category for the CPTPP preferential tariffs in domestic legislation under the Customs Tariff. This has resulted in Canada having granted duty-free status to 14 of these tariff items as from the entry into force of the Agreement on December 30, 2018, rather than gradually phasing out tariffs on these goods over time. For one tariff item, the CPTPP preferential tariffs were implemented in domestic law with a gradual phase-out of the CPTPP preferential tariffs, whereas the preferential tariffs should have been duty-free as from the entry into force of the Agreement.

Background

On March 8, 2018, Canada and 10 other Asia-Pacific countries (Australia, Brunei Darussalam, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) signed the CPTPP, which is a free trade agreement that incorporates, by reference, the provisions of the Trans-Pacific Partnership Agreement (TPP), with the exception of 22 suspensions focused, in part, on aspects of intellectual property (IP) and investor-state dispute settlement. The CPTPP entered into force on December 30, 2018, between Canada, Australia, Japan, Mexico, New Zealand and Singapore, the first six countries to ratify the Agreement. On January 14, 2019, the Agreement also entered into force for Vietnam.

Canada’s schedule of tariff commitments under the Agreement was negotiated on the basis of the structure of Canada’s tariff classification system (“tariff nomenclature”) as at January 1, 2010. There are periodic changes to tariff nomenclature — every five to six years through updates to the internationally agreed Harmonized System of commodity classifications, as well as domestic changes within that framework. Implementation of free trade agreements in Canadian law requires that the tariff commitments contained in the Agreement be mapped, or transposed, onto the tariff nomenclature in effect at the time of domestic implementation (i.e. December 30, 2018, in the case of the CPTPP).

An error with the transposition of CPTPP tariff commitments under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation Act resulted in 15 tariff items being assigned the incorrect staging category for the CPTPP preferential tariffs in domestic legislation under the Customs Tariff. This has resulted in Canada having granted duty-free status to 14 of these tariff items as from the entry into force of the Agreement, rather than gradually phasing out tariffs on these goods over time. The goods affected are hybrid-powertrain and solely-battery-electric powertrain passenger automobiles, buses, as well as certain textile floor coverings. Imports of these goods from CPTPP countries in 2018 totalled approximately $81.3 million. No importers of the affected buses and textile floor coverings claimed the CPTPP preferential tariff in the initial months after the entry into force of the CPTPP.

The other tariff item footnote 2 was made subject to a gradual phase-out of the CPTPP preferential tariffs, while it should have been duty-free as from the entry into force of the Agreement. Imports of this item from CPTPP countries in 2018 totalled approximately $0.4 million.

Objective

Description

The Order Amending the Schedule to the Customs Tariff (CPTPP) amends the staging categories for CPTPP preferential tariffs for hybrid-powertrain and solely-battery-electric powertrain passenger automobiles, buses, certain textile floor coverings, and miscellaneous rubber tires in the Customs Tariff for these tariff items such that they are assigned to properly reflect the negotiated tariff commitments by Canada in the CPTPP for these goods.

The revised tariffs on these goods apply on a forward basis only and duties will not be retroactively assessed on importations between December 30, 2018, and the entry into force of this Order. Goods already in transit to Canada as of the date the Order is made will receive the benefit of the duty-free treatment that Canada has applied to date on these goods.

The CPTPP Remission Order remits customs duties paid on importations, between December 30, 2018, and the entry into force of this Order, of the affected miscellaneous rubber tires under the CPTPP tariff treatment.

Regulatory development

Consultation

The Government consulted extensively in relation to the negotiated outcome that is reflected in this Order. In December 2011, the Government of Canada launched public consultations with provinces and territories, businesses, industry associations and the general public to determine whether Canadians would be supportive of launching free trade negotiations with the Trans-Pacific Partnership (TPP) countries. Stakeholders were regularly consulted throughout the negotiations of the TPP. In September 2017, the Government subsequently launched public consultations on the possibility of implementing the TPP with members other than the United States, which ultimately became the CPTPP. The parliamentary process was an additional opportunity for stakeholders and the general public to be informed of, and comment on, the CPTPP. The CPTPP is supported by a broad cross-section of Canadian business stakeholders from all regions and from many sectors.

Given these orders are not controversial and broad consultations have previously occurred in relation to the negotiated outcome they implement, additional public consultation and publication of these orders in the Canada Gazette, Part I, were not considered necessary.

Modern treaty obligations and Indigenous engagement and consultation

As a result of the Order Amending the Schedule to the Customs Tariff (CPTPP), customs duties will apply to anyone seeking to import goods classified under the 14 tariff items that were unintentionally granted duty-free status from a CPTPP country, including Indigenous peoples. However, no differential impacts are foreseen as the Order modifies the CPTPP preferential tariffs to reflect the tariff commitments of Canada in the CPTPP, affecting all importers, including Indigenous peoples.

The CPTPP Remission Order will result in remitted duties that will be accessible to all importers of the affected miscellaneous rubber tires under a CPTPP preferential tariff, including Indigenous peoples.

Instrument choice

The only viable mechanism to amend the preferential tariffs and to remit duties is through orders made under the Customs Tariff.

Regulatory analysis

Costs and benefits

This technical rectification is consistent with the expectations of domestic producers, who were consulted closely during the negotiations regarding the negotiated tariff commitments for these goods, as well as Canada’s trading partners.

The Order Amending the Schedule to the Customs Tariff (CPTPP) will result in approximately $5.7 million in tariff revenues over the 2019–2021 period, at which point these goods will be duty-free as per the CPTPP tariff commitments of Canada. These tariff revenues will be the result of the negotiated tariff commitment by Canada in the CPTPP for these goods and do not represent additional tariffs on those originally intended by CPTPP.

The CPTPP Remission Order is relieving in nature, and only impacts businesses that imported miscellaneous rubber tires under the CPTPP tariff preference. As of the end of May 2019, no importers of miscellaneous rubber tires goods had claimed the benefit of a CPTPP preferential tariff. However, the CPTPP Remission Order provides the appropriate rate for any such importations claiming the CPTPP preferential tariff before this Order was made, including any requests for adjustments.

Small business lens

These orders do not make changes to the importing and exporting of goods, including the required customs forms.

There is no incremental change to the level of administrative burden or compliance costs currently imposed on businesses, including small businesses, as a result of implementing the Order Amending the Schedule to the Customs Tariff (CPTPP) [the Order]. Accordingly, the Order reverts the rate of duty applicable to certain imported goods from the CPTPP parties to Canada’s negotiated commitments under the CPTPP. However, the Order increases costs for all importers, including small businesses, that import goods classified in the 14 tariff items for which the CPTPP preferential tariff have reverted to the rate committed to by Canada under the CPTPP. There will be no differential impacts for small businesses. On the other hand, the Order Amending the Schedule to the Customs Tariff (CPTPP) reduces costs for importers, including small businesses, that import miscellaneous rubber tires from CPTPP parties going forward.

“One-for-One” Rule

The orders do not make changes to the importing and exporting of goods, including the required customs forms. Therefore, no increase or decrease in the level of administrative burden imposed on businesses is anticipated. Accordingly, the “One-for-One” Rule does not apply.

Regulatory cooperation and alignment

These orders are not related to a work plan or commitment under a regulatory cooperation forum.

Strategic environmental assessment

Global Affairs Canada conducted an environmental assessment of TPP in accordance with The Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals. The initial environmental assessment encompassed both qualitative and quantitative analyses. The overall findings of the initial environmental assessment were that Canadian environmental impacts as a result of the TPP Agreement (now CPTPP) would likely be minor in nature.

These orders are consequential to the CPTPP. Therefore, a separate environmental assessment was not conducted.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for these orders.

Implementation, compliance and enforcement, and service standards

The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of these orders 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 CPTPP and will inform importers of all relevant CPTPP-related issues pertaining to these orders. The CBSA will also process any adjustment requests received under the CPTPP Remission Order.

Contact

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