Vol. 151, No. 14 — July 12, 2017
SOR/2017-140 June 20, 2017
CUFTA Rules of Origin for Casual Goods Regulations
P.C. 2017-832 June 20, 2017
His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 16(2) (see footnote a) of the Customs Tariff (see footnote 1), makes the annexed CUFTA Rules of Origin for Casual Goods Regulations.
CUFTA Rules of Origin for Casual Goods Regulations
1 In these Regulations, casual goods means goods other than goods imported for sale or for an industrial, occupational, commercial, or institutional or other like use.
2 Casual goods that are acquired in Ukraine are considered to originate in that country and are entitled to the benefit of the Ukraine Tariff if
- (a) the marking of the goods is in accordance with the marking laws of Ukraine and indicates that the goods are the product of Ukraine or Canada; or
- (b) the goods do not bear a mark or nothing indicates that the goods are not the product of Ukraine or Canada.
Coming into Force
3 These Regulations come into force on the day on which section 36 of the Canada–Ukraine Free Trade Agreement Implementation Act, chapter 8 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.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the regulations.)
In order to implement the Canada-Ukraine Free Trade Agreement (CUFTA), the Canada-Ukraine Free Trade Agreement Implementation Act (the Act) was introduced in the House of Commons on November 3, 2016, and received royal assent on June 1, 2017. In addition to the implementing Act, a number of consequential regulatory amendments are necessary to fully implement Canada’s tariff commitments under the CUFTA into Canada’s legal framework.
Negotiation of the CUFTA concluded on July 14, 2015, and the Agreement was signed by Canada and Ukraine on July 11, 2016.
Canada’s current trading relationship is relatively modest, with Ukraine ranking as Canada’s 76th largest merchandise trading partner. However, there are potential opportunities for Canadian businesses in sectors such as agriculture and agri-food, fish and seafood, aerospace, mining equipment, agricultural equipment and information and communication technologies. From 2014 to 2016, Canada’s average annual bilateral merchandise trade with Ukraine was $298 million, 0.03% of Canada’s total merchandise trade. Over this period, Ukraine’s average annual imports from Canada totalled $207 million, led by coal, fish and seafood, and pharmaceuticals. Canadian imports from Ukraine meanwhile totalled on average $91 million led by iron and steel, soybeans, and paints and dyes.
The objective of these amendments is to implement Canada’s tariff commitments under the CUFTA so that Canada and Ukraine can proceed with the implementation of the Agreement.
The CUFTA, like all of Canada’s free trade agreements, includes rules of origin that specify how much production must occur in Canada and/or Ukraine for a product to be considered originating, and, therefore, eligible for the preferential tariffs under the CUFTA.
The implementing bill established in domestic law the preferential tariffs provided by the CUFTA; it is necessary to satisfy the rules of origin of the CUFTA to be eligible to claim these preferential tariffs.
The following regulations will implement in domestic law these rules of origin. Accordingly, they are a necessary element of the implementation to allow importers to benefit from the preferential tariffs of the CUFTA.
- The CUFTA Rules of Origin Regulations implement, in Canada, the rules of origin negotiated by Canada and Ukraine that will be used to determine when goods have undergone sufficient production to qualify for preferential tariff treatment.
- The CUFTA Rules of Origin for Casual Goods Regulations establish the conditions under which goods acquired in Ukraine by travellers are considered originating, and, therefore, entitled to preferential tariff treatment. Where travellers acquire goods in Ukraine that are either marked “made in Ukraine,” or not marked to the contrary, the traveller can claim the Ukraine tariff preference on the importation of the goods into Canada.
- The CUFTA Tariff Preference Regulations allow eligible goods that are not shipped directly between Ukraine and Canada to retain the eligibility for preferential tariff rates provided the goods remain under customs control in the other countries through which the goods are transiting.
These regulations are non-discretionary in nature, as they reflect the negotiated outcome of the CUFTA. They are also similar to changes required to implement tariff-related provisions in Canada’s other free trade agreements (e.g. the Canada-European Union Comprehensive Economic and Trade Agreement, the Canada-Honduras Free Trade Agreement, the Canada-Korea Free Trade Agreement).
The “One-for-One” Rule does not apply to these regulations, as there is no change in administrative costs to business.
Small business lens
The small business lens does not apply to these regulations, as there are no costs imposed on business.
In December 2008, the Government of Canada launched public consultations with provinces and territories, businesses, industry associations and the general public to determine whether Canadians would be supportive of launching free trade negotiations with Ukraine.
Stakeholders were regularly consulted throughout the negotiations, including on issues concerning tariffs and rules of origin. The Parliamentary process was an additional opportunity for stakeholders and the general public to be informed of, and comment on, the CUFTA. Supporters include the Canadian Agri-Food Trade Alliance, Canadian Pork Council, Canadian Meat Council, Canada-Ukraine Chamber of Commerce, and the Ukrainian Canadian Congress.
By passing Bill C-31, Parliament has approved the implementation of the CUFTA. In addition to legislative amendments contained in the implementing bill, these regulations are necessary to fulfill Canada’s tariff commitments under the CUFTA so that Canada and Ukraine can proceed with the implementation of the Agreement. When Canada’s tariff commitments under the CUFTA are fully implemented under the Act, it is estimated that annual custom duties foregone by the Government would be approximately $2 million based on recent trade patterns with Ukraine. These foregone duties represent a benefit, in the form of lower customs duties to be paid by Canadian importers of Ukrainian originating products. The removal of Ukrainian tariffs on Canadian exports will similarly make Canadian goods more competitive in the Ukrainian market, potentially leading to increased exports across a range of sectors.
These regulations do not impose additional costs on importers (e.g. the same customs forms must be completed for importations). Rather, by fully implementing in domestic law all the elements of the CUFTA pertaining to tariffs, they enable importers to benefit from the preferential tariffs established by the Agreement and subsequent implementing legislation.
The CUFTA is an important milestone in the Canada-Ukraine bilateral relationship. In addition to generating commercial benefits for Canada businesses, the CUFTA will support the economic reform efforts of the Government of Ukraine.
Implementation, enforcement and service standards
The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of these regulations 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 will update its systems to account for the implementation in Canada of the CUFTA and will inform importers of all relevant CUFTA-related issues pertaining to these regulations and this order.
International Trade Policy Division
Department of Finance