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CETA Likely To Go Into Effect on July 1, 2017

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Update on the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) – April 2017 2017-04-24

The date of CETA implementation has not been “officially” confirmed, but everything points to July 1, 2017 according to various experts and news articles.
 
The Canadian Society of Customs Brokers (CSCB) recently announced to its membership:
 
“Bill C-30, the Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act had its second reading in the Senate on March 7th. At that time, it was referred to the Standing Senate Committee on Foreign Affairs and International Trade. Bill C-30 will need to go back to the Senate for a third reading and you can follow its progress on the Parliament of Canada website. With respect to when CETA will be implemented, according to Article 30.7 of the Agreement, CETA “shall enter into force on the first day of the second month following the date the Parties exchange written notifications certifying that they have completed their respective internal requirements and procedures or on such other date as the Parties may agree.” This means that if the Parties complete their respective internal requirements and procedures in April, for example, the CETA will enter into force on June 1 (the first day of the second month). However, the agreement includes “provisional” applications which state that the Parties can agree to apply the Agreement from the first day of the first month. Using the same example as in the previous paragraph, this would mean that CETA would enter into force on May 1, the first day of the first month.”
 
CBSA has also confirmed to the CSCB that it is the release date of a given importation that will determine the effective date for which the CETA preferential tariff treatment may be claimed. Obviously, the preferential treatment cannot be claimed until CETA is in effect. However, CETA preferential tariff treatment can be claimed for any CETA originating goods that are documented on a properly formatted “origin declaration” (see further below), which are customs released on or after the date CETA enters into force.
 
Generally speaking, a product must have undergone sufficient production in either Canada or the EU to be deemed “originating” for the purposes of the agreement. Canada and the EU have agreed to rules of origin that reflect their respective production and sourcing patterns.
 
The Protocol on Rules of Origin and Origin Procedures (the Protocol) is a stand-alone section of the CETA.
 
CETA’s overall approach to rules of origin mostly echoes Canada’s previous free trade agreements (FTAs) with other countries. The Protocol sets out the general rules that determine sufficient production, supplemented by an annex listing product-specific rules of origin.
 
Consistent with Canada’s other FTAs, the product-specific rules of origin  in CETA (see Annex 5) are generally written in a tariff-shift format and include “focused value” rules for several products, whereby only the value of specific, key non-originating components is considered when determining the originating status of the finished product. This contrasts with the “regional value content” (RVC) approach, used in some of Canada’s earlier FTAs, which requires producers to take the value of all non-originating parts and materials into consideration when determining origin. Canada and the EU are hoping the use of the “focused value” approach will benefit importers and exporters by minimizing the number of materials that must be tracked for origin purposes, thereby reducing the administrative burden on claims for preferential treatment.
 
Annex 5 of the Protocol sets out rules for products containing imported materials or parts.
 
  • In some cases, the rules specify a maximum percentage of the product’s total value that can be derived from sources other than Canada or the EU.
  • In other cases, the rules are based on whether the finished product is classified in the Harmonized System (HS) differently than its materials; this is also known as tariff-shift, whereby if a product has been substantially transformed within either Canada or the EU, such that when the materials used in production and the finished product are classified differently in the HS, the finished product may be considered originating.
 
For products such as specified fish and seafood products, textiles and apparel, passenger vehicles, and certain processed agricultural products, CETA also includes “origin quotas”; these are not to be confused with products subject to Tariff Rate Quotas (TRQs). The “origin quotas” found in Annex 5-A of the Protocol are akin to Tariff Preference Levels (TPL) found in some of Canada’s earlier FTAs. These “origin quotas” provide alternative and more liberal rules of origin for the above-listed products, and give exporters an opportunity, subject to certain annual quantitative limits, to export preferentially under CETA even when their products do not satisfy the main rules of origin.
 
While CETA specifies that Canada and the EU (the Parties) shall administer the “origin quotas” on a calendar year basis with the full in-quota quantity to be made available on January 1st of each year, the Parties have not yet announced how the quantitative limits for the various “origin quotas” will be managed, whether for imports into Canada or imports into the EU. Meaning, it is not yet known what Canadian-issued or EU-issued documentation (e.g. permits, certificates of eligibility) will be required to claim preferential tariff under the alternative rules of origin provided for under Annex 5-A.
 
For those familiar with the language found in Canada’s earlier FTAs, it is worth mentioning that while CETA is similar in many respects, there are significant differences in the terminology and methodology in CETA that take some getting used to. A reading of the full text is in order to gain a grasp of those differences.
 
Contrary to most of Canada’s FTAs, under CETA there will not be a dedicated certificate of origin form; but rather an “Origin Declaration”.
 
Annex 2 of the Protocol identifies the proper text of the CETA Origin Declaration. Section C – Origin Procedures / Article 18 – Proof of origin (of the Protocol) states that:
 
1. Products originating in the European Union, on importation into Canada, and products originating in Canada, on importation into the European Union, benefit from preferential tariff treatment of this Agreement on the basis of a declaration ("origin declaration").
 
2. The origin declaration is provided on an invoice or any other commercial document that describes the originating product in sufficient detail to enable its identification.
 
Section C – Origin Procedures / Article 19 – Obligations regarding exportations (of the Protocol) states that:
 
3. An origin declaration shall be completed and signed by the exporter unless otherwise provided.
 
 The CBSA further confirmed, with respect to the CETA Origin Declaration:
 
The origin procedures of the CETA are very similar to the existing Canada-European Free Trade Association Free Trade Agreement (CEFTA), including the origin declaration as the required proof of origin.  Therefore, there will be no form.  As an example, please refer to D11-4-2, Proof of Origin, paragraph 32 that refers to the CEFTA origin declaration. In the event that CETA enters into force, it will be administered in the same manner.
 
With respect to Annex 2 – Text of the Origin Declaration, CBSA has said:
 
“…traders are encouraged to confirm any procedure not specifically detailed in the CETA with the customs authority of the country of import. However, it is CBSA’s understanding that field 5 of the Origin Declaration may be left blank where the exporter in Canada includes a Business Number or the exporter in the EU provides a Registered Exporter Number in field 2 of the origin declaration.”
 
CBSA has also confirmed, per the instructions of the 3rd footnote (Annex 2), that:
 
“Canada/EU” is to be entered on the Origin Declaration for all CETA originating goods, regardless of the country of production.
 
When CETA goes into effect, CBSA has advised that the tariff treatment code for CETA, for purposes of coding the B3 form, will be “32”.
 
With respect to duty rates and products subject to TRQs that will apply under CETA, importers and exporters are advised to review Chapter 2 and its relevant annexes (2-A Tariff Elimination, 2-A Tariff Schedule and 2-B Tariff Rate Quotas)
 
The table of contents to the full text of CETA is available here.
 
Additional information on CETA, published by the Government of Canada, is also available here.
 
Watch the Milgram website for further updates on CETA.
 

Source: CSCB, CBSA, Global Affairs Canada

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