Vol. 151, No. 28 — July 15, 2017

Export Allocations Regulations

Statutory authority

Export and Import Permits Act

Sponsoring department

Department of Foreign Affairs, Trade and Development

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The proposed new Export Allocations Regulations would be created under the authority of paragraphs 12(a) and 12(b) of the Export and Import Permits Act (EIPA). These Regulations would define the information to be provided in an application for an export allocation, including in respect of the Comprehensive Economic and Trade Agreement (CETA) Origin Quotas that are found in Annex 5-A (Origin Quotas and Alternatives to the Product-Specific Rules of Origin in Annex 5) of Annex 5 (Product Specific Rules of Origin) of the CETA between Canada and the European Union (EU). The CETA Origin Quotas cover agricultural goods, textiles and apparel products, and vehicles.

The Minister of Foreign Affairs’ ability to issue export allocations for the CETA Origin Quotas was established by An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures through an amendment to paragraph 6.2(2)(b) of the EIPA. An allocation is a specific quantity of quota that is granted to an eligible applicant for a prescribed time period. This allows for orderly export marketing. In the absence of an allocation, exporters must compete on a shipment-by-shipment, first-come, first-served basis for access under the quota. If their goods are unable to enter the market under the quota, they will be subject to high rates of duty.

Paragraphs 12(a) and (b) of the EIPA allow the Governor in Council to make regulations that prescribe the information that must be contained in an application to receive an export allocation. The proposed Regulations would establish the information applicants must provide to the Minister of Foreign Affairs when requesting an export allocation for the CETA Origin Quotas. They would also prescribe the considerations the Minister shall take into account in the process.

These new proposed Export Allocations Regulations are a key component of a wider regulatory framework that was requested by affected stakeholders during consultations on the administration of the CETA export Origin Quotas, and is comprised of the following: proposed amendments to the Export Control List (ECL); new proposed Export Permits Regulations (Non-Strategic Products); and proposed amendments to the existing Export Permits Regulations.

The ECL would be amended to add the tariff items in Tables A.1 (Annual Quota Allocation for High-Sugar Containing Products Exported from Canada to the European Union), A.2 (Annual Quota Allocation for Sugar Confectionary and Chocolate Preparations Exported from Canada to the European Union), A.3 (Annual Quota Allocation for Processed Foods Exported from Canada to the European Union), A.4 (Annual Quota Allocation for Dog and Cat Food Exported from Canada to the European Union), D.1 (Annual Quota Allocation for Vehicles Exported from Canada to the European Union) and six tariff lines from Table C.2 (Annual Quota Allocation for Apparel Exported from Canada to the European Union) of Annex 5-A of CETA of Annex 5 to the Protocol on rules of origin and origin procedures of CETA. These goods would be added to the ECL pursuant to paragraph 3(1)(d) [an intergovernmental arrangement or commitment (i.e. CETA)] and paragraph 3(1)(f) [orderly export marketing of goods] of the EIPA. In addition to the ECL amendments, new proposed Export Permit Regulations (Non-Strategic Products) would be established to identify the information required of a permit applicant for the CETA export Origin Quotas. Finally, an amendment would be made to the existing Export Permit Regulations to exclude from its scope tariff lines that would be added to the ECL for certain non-strategic products, including the CETA Origin Quotas. This latter approach is similar to a recent amendment to exclude softwood lumber products from the existing Export Permit Regulations while introducing separate Export Permit Regulations (Softwood Lumber Products 2015).

All of these regulations are required by the date of CETA’s provisional application to ensure that eligible goods exported from Canada receive the preferential tariff treatment on the importation into the EU.

Background

The benefits of CETA will be broad, including tariff reduction and elimination obligations, and comprehensive provisions with respect to investment and cross-border trade in services, government procurement, and financial services.

A key objective of CETA is to eliminate trade barriers between Canada and the EU on most goods, from maple syrup to salmon (from Canada). Upon CETA’s provisional application, Canadian producers, manufacturers, exporters, importers, and consumers will benefit from the phased reduction or immediate elimination of tariffs on “originating” goods as per the tariff elimination schedule found in Annex 2-A (Tariff Elimination) of CETA. Additional quantities of goods will qualify for preferential tariff treatment through the Origin Quotas established in Annex 5-A (Origin Quotas and Alternatives to the Product-Specific Rules of Origin in Annex 5) of Annex 5 (Product Specific Rules of Origin) to the Protocol on Rules of Origin and Origin Procedures of CETA.

CETA’s “rules of origin” establish the minimum amounts of Canadian and EU content that products must contain to qualify for the CETA preferential tariff indicated in Annex 2-A (Tariff Elimination) upon import into the applicable Party, e.g. 55% Canada-EU content for vehicles from Canada into the EU. “Originating” goods are those goods that meet the applicable rules of origin found in Annex 5 of the Protocol on Rules of Origin and Origin Procedures of CETA. There are no quantitative limits on the trade of these goods.

Goods that do not meet the rules of origin found in Annex 5 may still be eligible to enter the EU market at preferential tariff rates if they qualify under the more flexible “alternative” rules of origin contained in Annex 5-A of Annex 5 to the Protocol on Rules of Origin and Origin Procedures of CETA (e.g. 30% Canada-EU content for vehicles from Canada to the EU). Prescribed annual quantities of goods, called “Origin Quotas,” which meet the alternative rules of origin, may be imported into the EU at the same preferential tariff rate available for the equivalent “originating” goods (e.g. 100 000 vehicles from Canada to the EU per year). Tables A.1, A.2, A.3, A.4, B.1, C.1, C.2, and D.1 of Annex 5-A (Origin Quotas and Alternatives to the Product-Specific Rules of Origin in Annex 5) specify goods that are eligible to be exported to the EU market at preferential tariff rates through Origin Quotas, the annual quantities, the units of measurement, and the alternative rules of origin the goods must meet to qualify for preferential tariff treatment.

The Minister of Foreign Affairs may issue allocations for goods only if they have been added to the ECL. Once the Minister has issued allocations to eligible applicants, allocation holders must request permits on a shipment-by-shipment basis that will draw against the balance of quota remaining in their allocation.

Objectives

The proposed Export Allocations Regulations are needed for the purpose of administering the CETA Origin Quotas. Following consultations on the administration of the Origin Quotas, the Minister has decided to administer certain Origin Quotas through the issuance of export allocations and export permits. The proposed Export Allocations Regulations prescribe the information to be provided in an application for an allocation.

Description

The proposed Export Allocations Regulations would require applicants for export allocations to provide the name, address, telephone number and email address of the exporter, and the same for an agent or mandatary applying on behalf of an exporter; the official language selected for communications with the export and/or agent or mandatary; and, a description of the product for which the applicant is applying for an allocation of quota under this regulation, including the item number assigned to the product in the Export Control List; an indication of whether the exporter and, if applicable, the agent or mandatary is a resident of Canada; and any other information requested by the Minister for clarification purposes.

These proposed Regulations would also prescribe the considerations that the Minister would take into account when deciding whether to issue an export allocation, including whether the exporter or the exporter’s agent or mandatary has furnished the necessary information; whether the exporter has complied with the provisions of the EIPA; and whether the exporter has furnished false or misleading information in connection with any reporting required by the EIPA or any term or condition of an export allocation or export permit.

The proposed Regulations would also set out that when an application for an export allocation has been approved, the written approval becomes a valid export allocation.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no significant change in administrative costs to business.

Small business lens

The small business lens does not apply to this proposal, as there are no significant costs to small business.

Consultation

During negotiations, officials undertook consultations with producers, industry associations, the provinces, and other interested parties. Canadian industry associations and companies supported and helped develop Canada’s position prior to undertaking commitments on CETA Origin Quotas, recognizing that CETA will provide Canadian companies with important market access at a preferential tariff rate.

Subsequently, during broad-based consultations with industry and with provincial and territorial governments, stakeholders indicated that the issuance of permits would provide certainty that their exports would receive Origin Quota preferential tariff treatment upon arrival in the EU. This would generate useful data to inform the Minister’s future allocation decisions. For certain export Origin Quotas, specifically vehicles and high sugar containing products, stakeholders also requested allocation of the Origin Quota for export certainty and risk mitigation in their industries. The Government of Canada is proposing a regulatory framework that will provide for the administration of the origin quotas.

Rationale

The new Export Allocations Regulations would be created to define the types of information that shall be provided to the Minister in an allocation application. Paragraphs 12(a) and (b) of the EIPA allow the Governor in Council to make regulations that prescribe the information that shall be required when applying for an export allocation.

Implementation, enforcement and service standards

As with Canada’s existing practice in quota administration, information will be made publicly available to exporters immediately following the Treasury Board Committee’s approval of the regulations and prior to entry into force. A Notice to Exporters providing the administrative processes for the Origin Quotas will be posted on the Global Affairs Canada Export and Import Controls website. This information will also be included in a Canada Border Services Agency (CBSA) D-memorandum which will be made available on the CBSA website with a link to the Global Affairs Canada website. The issuance of export permits will be subject to Global Affairs Canada’s service standards for the delivery of permits. Global Affairs Canada’s current service standards require that

Contact

Reuben East
Deputy Director
Trade Controls Policy Division (TIC)
Global Affairs Canada
111 Sussex Drive
Ottawa, Ontario
Telephone: 343-203-4365
Email: reuben.east@international.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to section 12 (see footnote a) of the Export and Import Permits Act (see footnote b), proposes to make the annexed Export Allocations 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 Reuben East, Deputy Director, Trade Controls, Global Affairs Canada, 111 Sussex Drive, Ottawa, Ontario K1N 1J1 (tel.: 343-203-4365; fax: 613-996-0612; email: Reuben.East@international.gc.ca).

Ottawa, July 13, 2017

Jurica Čapkun
Assistant Clerk of the Privy Council

Export Allocations Regulations

Interpretation

Definition of product

1 In these Regulations, product means any product referred to in items 5201 to 5210 of Group 5 of the schedule to the Export Control List.

Export Allocations

Application

2 An application under paragraph 6.2(2)(b) of the Export and Import Permits Act for an export allocation with respect to a product shall include, in the form provided by the Minister,

Considerations to be taken into account

3 The Minister shall take the following considerations into account when deciding whether to issue an export allocation:

Information to be supplied

4 Every person to whom an export allocation has been issued shall provide the Minister with the following information:

Issuance of export allocation

5 When an application for an export allocation has been approved by the Minister, the written approval of the Minister becomes a valid export allocation.

Coming into Force

6 These Regulations come into force on the day on which section 15 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.

[28-1-o]