Canada Gazette, Part I, Volume 151, Number 28: CETA Rules of Origin Regulations

July 15, 2017

Statutory authority

Customs Tariff

Sponsoring department

Department of Finance

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 proposed amendments 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” would 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) would extend 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 proposed Regulations above.

The following three proposed regulations would 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 proposed 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 would implement, in Canada, the rules of origin negotiated by Canada and the EU under the CETA that would 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 would establish the conditions under which goods acquired in the EU by travellers would be 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 would be able to claim the CETA tariff preference on importation of the goods into Canada.
• The CETA Tariff Preference Regulations would 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 would not apply to these proposed regulations and Order, as there would be no change in administrative costs to business.

Small business lens

The small business lens would not apply to these proposed regulations and Order as there would be 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.

Rationale

These proposed regulations and this proposed 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) would monitor compliance with the terms and conditions of these proposed regulations and this proposed 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 would update its systems to account for the implementation in Canada of the CETA and would inform importers of all relevant CETA-related issues pertaining to these proposed regulations and Order.

Contact

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

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsection 16(2) (see footnote a) of the Customs Tariff (see footnote b), proposes to make the annexed CETA Rules of Origin Regulations.

Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Brad Norwood, International Trade Policy Division, Department of Finance, 90 Elgin Street, Ottawa, Ontario K1A 0G5 (email: fin.tariff-tarif.fin@canada.ca).

Ottawa, July 13, 2017

Jurica Čapkun
Assistant Clerk of the Privy Council

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.

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