Vol. 150, No. 13 — June 29, 2016

Registration

SOR/2016-145 June 14, 2016

CUSTOMS ACT

Regulations Amending Certain Regulations Made Under the Customs Act (CPAFTA)

P.C. 2016-514 June 14, 2016

Whereas the annexed Regulations give effect, in part, to a public announcement made on March 22, 2013 known as Customs Notice 13-006;

And whereas the Notice provides that the regulatory amendments giving effect to that announcement come into force on April 1, 2013;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Public Safety and Emergency Preparedness, pursuant to subsection 43.1(2) (see footnote a), section 164 (see footnote b) and paragraph 167.1(b) (see footnote c) of the Customs Act (see footnote d), makes the annexed Regulations Amending Certain Regulations Made Under the Customs Act (CPAFTA).

Regulations Amending Certain Regulations Made Under the Customs Act (CPAFTA)

Exporters’ and Producers’ Records Regulations

1 The definition advance ruling in section 1 of the Exporters’ and Producers’ Records Regulations (see footnote 1) is replaced by the following:

advance ruling means an advance ruling referred to in Article 509 of NAFTA, Article 5.8 of CIFTA, Article E-09 of CCFTA, Article V.9 of CCRFTA, Article 28 of Annex C of CEFTA, Article 419 of CPFTA, Article 419 of CCOFTA, Article 5-9 of CJFTA or Article 4.10 of CPAFTA. (décision anticipée)

Free Trade Agreement Advance Rulings Regulations

2 Paragraph 2(d) of the Free Trade Agreement Advance Rulings Regulations (see footnote 2) is replaced by the following:

3 (1) Subparagraph 14(a)(vi) of the Regulations is replaced by the following:

(2) The portion of paragraph 14(b) of the Regulations before subparagraph (i) is replaced by the following:

(3) Paragraph 14(b) of the Regulations is amended by striking out “or” at the end of subparagraph (vi), by adding “or” at the end of subparagraph (vii) and by adding the following after subparagraph (vii):

(4) Paragraph 14(h) of the Regulations is amended by striking out “or” at the end of subparagraph (vii) and by adding the following after subparagraph (viii):

Certification of Origin of Goods Exported to a Free Trade Partner Regulations

4 Paragraph 2(c) of the Certification of Origin of Goods Exported to a Free Trade Partner Regulations (see footnote 3) is replaced by the following:

5 Paragraph 3(b) of the Regulations is replaced by the following:

Tariff Item nos. 9971.00.00 and 9992.00.00 Accounting Regulations

6 Paragraph 2(b) of the Tariff Item Nos. 9971.00.00 and 9992.00.00 Accounting Regulations (see footnote 4) is replaced by the following:

Refund of Duties Regulations

7 The heading of Part 5.1 of the Refund of Duties Regulations (see footnote 5) is replaced by the following:

Goods Imported from Costa Rica, an EFTA State, Peru, Colombia, Jordan or Panama

8 (1) The portion of section 23.1 of the Regulations before paragraph (a) is replaced by the following:

23.1 This Part applies to the granting of a refund under paragraph 74(1)(c.11) of the Act of duties paid on imported goods in respect of which no claim for preferential tariff treatment under CCRFTA, CEFTA, CPFTA, CCOF‍TA, CJFTA or CPAFTA was made at the time the goods were accounted for under subsection 32(1), (3) or (5) of the Act, and that were imported from, as the case may be,

(2) Section 23.1 of the Regulations is amended by striking out “or” at the end of paragraph (d), by adding “or” at the end of paragraph (e) and by adding the following after paragraph (e):

9 Paragraph 23.3(b) of the Regulations is replaced by the following:

Coming into Force

10 These Regulations are deemed to have come into force on April 1, 2013.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issues

The Canada-Panama Free Trade Agreement (CPAFTA) was signed on May 14, 2010, and came into force on April 1, 2013. Although the Canada Border Services Agency (CBSA) has been administering the CPAFTA since it came into force, amendments to Canada’s existing regulatory framework are required to fully codify into law the customs procedures related to the CPAFTA.

As part of the negotiations for this Free Trade Agreement (FTA), Canada and Panama agreed to procedures governing the verification of origin of goods claiming preferential treatment under the CPAFTA. New regulations are necessary in order to codify into Canadian law the verification of origin procedures agreed to by Canada and Panama.

Background

Under a Free Trade Agreement, a range of Canadian goods and services benefit from the reduction or elimination of tariff and non-tariff barriers to trade. With the exception of a few agricultural goods, the CPAFTA essentially eliminates the customs duties on all imports from Panama, either immediately upon implementation of the agreement, or through a tariff phase-out. The CPAFTA also eliminates tariffs on more than 90% of goods exported from Canada to Panama.

Pursuant to the Customs Tariff, goods imported into Canada from all countries, other than North Korea, are entitled to the Most-Favoured-Nation Tariff. The Customs Tariff also establishes a series of preferential tariff treatments, whose rates of duty are lower than the Most-Favoured-Nation Tariff rate. Preferential tariff treatments include the General Preferential Tariff, Least-Developed Country Tariff, Commonwealth Caribbean Countries Tariff, Australia Tariff, New Zealand Tariff and the various preferential tariffs that have been negotiated between Canada and its free trade partners.

Canada has 11 Free Trade Agreements currently in force, namely the North American Free Trade Agreement, the Canada-Chile Free Trade Agreement, the Canada-Costa Rica Free Trade Agreement, the Canada-Israel Free Trade Agreement, the Canada-European Free Trade Association Free Trade Agreement, the Canada-Peru Free Trade Agreement, the Canada-Colombia Free Trade Agreement, the Canada-Jordan Free Trade Agreement, the Canada-Honduras Free Trade Agreement, the Canada-Korea Free Trade Agreement and the Canada-Panama Free Trade Agreement. The customs procedures contained in the Canada-Panama Free Trade Agreement are similar to those of the North American Free Trade Agreement, the Canada-Peru Free Trade Agreement and the Canada-Colombia Free Trade Agreement. The amendments to these regulations and the new regulations described below were publicly announced by the CBSA in a Customs Notice posted on March 22, 2013 (CN13-006).

The Customs Notice can be viewed at the following Web address:

CN13-006:

http://www.cbsa-asfc.gc.ca/publications/cn-ad/cn13-006-eng.html

Objectives

This regulatory proposal is intended to incorporate the CPAFTA into Canada’s existing regulatory framework by allowing customs procedures related to rules of origin to be administered in accordance with the terms of the CPAFTA.

Description

In order to implement the CPAFTA, minor amendments to five existing regulations made under the Customs Act (the Act) are necessary, as well as the creation of a new regulation.

Amendments to regulations
Exporters’ and Producers’ Records Regulations

An advance ruling is a written ruling issued by a CBSA officer before goods are imported. Advance rulings can consist of determinations related to a variety of issues, including such things as the tariff classification of the goods, the applicable rate of customs duty and the originating status of a good under a free trade agreement. The definition of “advance ruling” found at section 1 of the Exporters’ and Producers’ Records Regulations incorporates by reference specific Articles from the FTAs to which Canada is a signatory. These Articles describe the subject matter upon which applications for advance rulings under each of these FTAs can be based, for example, whether or not a good qualifies as an originating good under the FTA. Section 1 is amended to incorporate the CPAFTA requirements regarding advance rulings (Article 4.10 of the CPAFTA), into the definition of “advance ruling” applicable in the Exporters’ and Producers’ Records Regulations.

Free Trade Agreement Advance Rulings Regulations

Section 2 of the Free Trade Agreement Advance Rulings Regulations describes the classes of persons [e.g. importers and persons authorized to account for goods under paragraph 32(6)(a) or subsection 32(7) of the Act] eligible to apply for an advance ruling with respect to goods proposed to be imported from one of Canada’s free trade partners. The classes of persons eligible to apply for an advance ruling is expanded to include producers in Panama of materials used in the production of goods produced in Panama.

Section 14 of the Free Trade Agreement Advance Rulings Regulations enumerates the grounds upon which an advance ruling may be modified or revoked.

One such ground permits officers to modify or revoke advance rulings in circumstances where errors have been made in the application of the North American Free Trade Agreement, the Canada-Chile Free Trade Agreement, the Canada-Costa Rica Free Trade Agreement, the Canada-Peru Free Trade Agreement, and the Canada-Colombia Free Trade Agreement and the Canada-Jordan Free Trade Agreement with respect to goods that re-enter Canada after being exported for alteration or repair. This section is amended to add the CPAFTA to this list.

Section 14 also allows for an advance ruling to be modified or revoked where the ruling is not in accordance with an interpretation agreed to by Canada and its relevant free trade partner. This section is amended to include reference to goods exported from Panama, and to reference interpretations agreed to by Canada and Panama with respect to the relevant provisions of the CPAFTA.

Section 14 is also amended to address instances where an advance ruling can be modified or revoked in order to conform with a modification made to certain chapters of the CPAFTA.

Certification of Origin of Goods Exported to a Free Trade Partner Regulations

Section 97.1 of the Act addresses the Certificate of Origin that must be provided by exporters of goods to free trade partners who claim preferential tariff treatment under an FTA. The Certificate of Origin requirements that must be met in order to satisfy section 97.1 are described in the Certification of Origin of Goods Exported to a Free Trade Partner Regulations.

The Certification of Origin of Goods Exported to a Free Trade Partner Regulations are amended to add Panama to the list of free trade partners for which an exporter, who is not the producer of the good, may complete a Certificate of Origin based on a certificate completed and signed by the producer and provided voluntarily to the exporter, stating that the goods meet the applicable rules of origin.

These Regulations are also amended to allow, in the case of goods exported to Panama, certificates of origin to be completed in English, French, or Spanish.

Tariff Items Nos. 9971.00.00 and 9992.00.00 Accounting Regulations

Tariff item Nos. 9971.00.00 and 9992.00.00 deal with goods that, regardless of their country of origin, have been returned to Canada after having been exported to one of Canada’s free trade partners (i.e. the United States, Mexico, Chile, Costa Rica, Israel or other Canada-Israel Free Trade Agreement (CIFTA) beneficiary, Peru, or Colombia) for repair or alteration.

These Regulations provide that proof of this exportation must be submitted when such goods are accounted for under section 32 of the Act. This amendment adds Panama to the list of Canada’s free trade partners to whom these obligations apply.

Refund of Duties Regulations

The amendments to the Refund of Duties Regulations allows duties on eligible goods imported from Panama, to be refunded in cases where a claim for preferential tariff treatment under the CPAFTA was not made at the time the goods were initially accounted for under section 32 of the Act.

New regulations
CPAFTA Verification of Origin Regulations

The new CPAFTA Verification of Origin Regulations implement the customs procedures associated with verifying the origin of goods for which preferential tariff treatment under the CPAFTA has been claimed. These procedures can include, for example, the manner of conducting a verification of origin, the conditions surrounding a verification visit, and the verification requirements that the exporter and the producer must meet.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business. Since the implementation of the CPAFTA on April 1, 2013, the administrative procedures remain unchanged as a result of these regulatory amendments.

Small business lens

The small business lens does not apply to this proposal, as there are no costs to small business. Since the implementation of the CPAFTA on April 1, 2013, the administrative procedures remain unchanged as a result of these regulatory amendments.

Consultation

Prior to launching the FTA negotiations, Canadian manufacturers, importers and exporters were consulted extensively and kept informed of developments throughout all these negotiations, including with respect to rules of origin issues. The regulatory amendments contained herein were announced by the CBSA in Customs Notice CN13-006. The Customs Notice provided opportunities for the public to review the proposed regulatory changes and provide comments to the CBSA. No comments were received.

Rationale

Canada’s Free Trade Agreements are governed by a network of regulations (e.g. the Exporters’ and Producers’ Records Regulations and the other regulations listed above) that, taken together, implement into Canadian law the customs procedures negotiated as part of each FTA.

Consequently, with each new FTA implementation bill passed by the Canadian Parliament, a series of minor, technical amendments are needed in order to incorporate the new FTA into Canada’s existing regulatory framework.

Given that since the implementation of the CPAFTA, the CBSA has been administering these regulations as though the amendments announced in Customs Notice CN13-006 were already in force, the amendments have no business or consumer impacts, nor do they impose additional costs to the CBSA or to stakeholders.

Implementation, enforcement and service standards

Paragraph 167.1(b) of the Act allows regulatory changes that have previously been the subject of a public announcement to have a retroactive effect to the day of the announcement. The proposed regulations would be deemed to have come into force on April 1, 2013. Since that date, the CBSA has been administering these regulations as though the amendments announced in Customs Notice CN13-006 were already in force.

These amendments are therefore technical and housekeeping in nature and will have no impact on the continuing administration of these regulations.

Subsection 35.1(5) of the Act provides for the denial or withdrawal of preferential tariff treatment in the event that the requirements set out in the regulations are not met. The CBSA will continue to monitor compliance with these regulations in the course of its regular administration of customs and tariff related legislation and regulations.

Contact

Caley Sayers
Trade and Anti-dumping Programs Directorate
Canada Border Services Agency
222 Queen St.
4th Floor
Ottawa, Ontario
K1A 0L8