Vol. 151, No. 28 — July 15, 2017

Regulations Amending the Export Permits 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 Export Permits Regulations (EPR), established under the authority of paragraphs 12(a) and 12(b) of the Export and Import Permits Act (EIPA), set forth information regarding, among other things, what applicants must provide as part of an export permit application process for certain goods and technology listed on the Export Control List (ECL). The EPR’s original aim was to control trade for security-related purposes and currently almost exclusively pertains to strategic goods, such as firearms and explosives.

The EPR needs to be amended for two reasons: (1) in order for Canada to implement and administer its international obligations under the Comprehensive Economic and Trade Agreement (CETA) with the European Union (EU); and (2) to exclude from the scope of the EPR certain non-strategic goods that will be subject to the new Export Permits Regulations (Non-Strategic Products), i.e. CETA export origin quota goods (e.g. apparel and vehicles) and other non-strategic goods (e.g. peanut butter and sugar-containing products to the United States).

The proposed amendment to the existing Export Permits Regulations is part of a wider regulatory framework that will provide for the administration of the CETA origin quotas. New Export Permits Regulations (Non-Strategic Products) are proposed to allow the Minister to issue export permits for goods subject to CETA’s export Origin Quota provisions 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 Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. A simultaneous amendment is proposed to the ECL to add certain tariff codes listed 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. These goods would be added 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. Finally, new Export Allocations Regulations are proposed to provide the Minister with guidance for issuing export allocations for certain non-strategic goods (e.g. peanut butter to the United States, apparel and vehicles to 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, as applicable, 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 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 (Product Specific Rules of Origin) 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.

All goods covered by the scope of the ECL require export permits in order to be released from Canadian territory. Permits issued under the regulatory authority of the proposed new Export Permits Regulations (Non-Strategic Products) would be used to administer access to the CETA export Origin Quotas and to monitor their utilization levels. This would ensure that all Origin Quota exports are accounted for against the total annual negotiated quantity of goods that can receive preferential tariff access upon import to the EU.

The existing EPR would be amended to exclude from its coverage the goods subject to the proposed new Export Permits Regulations (Non-Strategic Products).

Objectives

The Government of Canada undertook a broad-based engagement process, including industry stakeholders and provincial and territorial governments, on the administration of CETA Origin Quotas. Pursuant to the outcomes of this process, it is proposed that export Origin Quotas for certain goods be administered by way of export permits to enable orderly export marketing of the eligible goods that are subject to the quantitative limitation that, on importation into the EU, will be eligible for the benefit provided for by CETA. In order to administer the export Origin Quotas through the issuance of export permits, the goods would be added to the ECL. Proposed new Export Permits Regulations (Non-Strategic Products) are needed for the purpose of issuing permits for certain CETA Origin Quota goods added to the ECL. In the absence of these new permit regulations, Canada will only be able to administer the export Origin Quotas and monitor their utilization levels by using the existing EPR whose original aim was to control trade for security-related purposes. In recognition of the difficulties in using permits issued under the EPR for commercial trade reasons, an amendment was made to exclude softwood lumber products from its scope and new Regulations were drafted specifically for softwood lumber products [i.e. Export Permit Regulations (Softwood Lumber Products 2015)]. The proposed Export Permits Regulations (Non-Strategic Products) will enable the Minister to request similar types of information as it is authorized under the EPR, but with the aim of administering such non-strategic goods as those subject to the CETA Origin Quotas.

The proposal seeks to amend the EPR to exclude from its scope the goods that will be subject to the proposed new Export Permits Regulations (Non-Strategic Products) by the date of CETA’s provisional application. These proposed Regulations are needed by CETA’s provisional application to enable the Minister to issue permits to exporters who wish to access the export Origin Quotas.

Description

This proposal will exclude certain non-strategic goods, including the CETA Origin Quota goods (e.g. high-sugar containing products, vehicles and apparel) from the scope of the EPR such that these goods will be subject to the new Export Permits Regulations (Non-Strategic Products).

“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 on small business.

Consultation

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

Stakeholders indicated during subsequent, broad-based consultations on the administration of the Origin Quotas that issuance of permits would provide certainty that their exports would receive Origin Quota preferential tariff treatment upon arrival in the EU. Stakeholders also expressed a preference for the Government of Canada to obtain its own data on Origin Quota utilization in order to inform possible future allocation decisions and the application of growth provisions. Based on stakeholder input, the Department is proposing a regulatory framework that will provide for the administration of the origin quotas.

The proposed Regulations are being published for a 15-day comment period.

Rationale

In order to issue export permits for CETA export Origin Quota-eligible goods, certain goods covered by CETA export Origin Quota provisions would be added to the ECL (e.g. high-sugar containing products, processed foods and vehicles) prior to CETA’s provisional application. In accordance with subsections 7.1 and 8.31 of the EIPA, export permits for the purposes of implementing CETA may only be issued for goods included on the ECL.

It is proposed that the existing EPR be amended to exclude CETA Origin Quota goods and certain other non-strategic goods (e.g. peanut butter to the United States) on the ECL. In turn, these goods would be added to the proposed new Export Permits Regulations (Non-Strategic Products) to define the information to be provided in a permit application and to allow the Minister to issue permits for the Origin Quotas and certain other non-strategic goods.

Implementation, enforcement and service standards

As with Canada’s existing practice for quota administration, information will be made publicly available to exporters immediately following the Treasury Board Committee’s approval of the Regulations prior to provisional application. 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 and linked 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 Regulations Amending the Export Permits 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

Regulations Amending the Export Permits Regulations

1 Subsection 2(1) of the Export Permits Regulations (see footnote 1) is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):

2 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.

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