Vol. 148, No. 21 — October 8, 2014
SOR/2014-217 September 26, 2014
CHFTA Rules of Origin Regulations
P.C. 2014-979 September 25, 2014
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 b), makes the annexed CHFTA Rules of Origin Regulations.
CHFTA RULES OF ORIGIN REGULATIONS
RULES OF ORIGIN
1. The following provisions of the Canada–Honduras Free Trade Agreement have the force of law in Canada:
- (a) Articles 4.1 to 4.3;
- (b) Paragraph 1 of Article 4.4;
- (c) Articles 4.5 to 4.13; and
- (d) Annexes 4.1 and 4.5.
COMING INTO FORCE
2. These Regulations come into force on the day on which section 43 of the Canada — Honduras Economic Growth and Prosperity Act, chapter 14 of the Statues of Canada, 2014, comes into force, but if these Regulations 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 or the orders.)
The Canada–Honduras Free Trade Agreement (CHFTA) was signed on November 5, 2013. When implementing free trade agreements in Canada, legislation and associated regulations and orders are necessary to implement commitments into the Canadian legal framework.
The Canada — Honduras Economic Growth and Prosperity Act received Royal Assent on June 19, 2014. Associated regulations and orders are required to fully implement the commitments of the CHFTA into the Canadian legal framework.
To fully implement Canada’s obligations under the CHFTA.
The CHFTA Rules of Origin Regulations implement, in Canada, the rules of origin negotiated by Canada and Honduras that will be used to determine when goods have undergone sufficient production to qualify for preferential tariff treatment. Goods that meet the criteria set out in the CHFTA Chapter on Rules of Origin or its associated annexes qualify as originating and therefore are eligible for preferential tariff treatment. Preferential tariff treatment under the CHFTA, which reflects the actual reduction in specific rates of duty, has been implemented in the Customs Tariff through the Canada — Honduras Economic Growth and Prosperity Act.
The CHFTA Rules of Origin for Casual Goods Regulations establish the conditions under which goods acquired in Honduras by travelers are considered originating and therefore entitled to preferential tariff treatment. Where travellers acquire goods in Honduras that are either marked as made in Honduras, or not marked to the contrary, the traveller can claim the Honduras tariff preference on importation of the goods into Canada.
The CHFTA Tariff Preference Regulations allow eligible goods that are not shipped directly between Honduras and Canada to retain their eligibility for preferential tariff rates provided the goods remain under customs control in third countries.
The CHFTA Sugar Aggregate Quantity Limit Order implements the negotiated outcome between Canada and Honduras with respect to market access for sugar. It sets out the annual quantity limits of certain sugar products that can be imported from Honduras and receive preferential tariff treatment. A tariff rate quota has been established under the CHFTA that allows 2 500 metric tonnes of refined sugar to be imported in the first year following the entry into force of the agreement. This quantity gradually increases to 5 000 metric tonnes by year 15 of the CHFTA and remain at that level thereafter.
The Imports of Certain Textile and Apparel Goods from Honduras Customs Duty Remission Order sets out the maximum quantities of textile and apparel goods that may be eligible for the benefits of the CHFTA under tariff preference levels. The tariff preference levels established under the CHFTA allow for a quantity of four million square metre equivalents (SME) of non-originating apparel and one million SME of non-originating fabric and textile goods to be imported at preferential tariff rates.
The “One-for-One” Rule does not apply to these regulations and orders, as there is no change in administrative costs to business.
Small business lens
The small business lens does not apply to these regulations and orders, as there are no costs imposed on business.
In January 2001, the Government of Canada launched public consultations with provinces and territories, businesses, industry associations and the general public to gauge Canadians’ interests and sensitivities in launching free trade negotiations with Central America. Free trade negotiations with Honduras and three other Central American nations (El Salvador, Nicaragua and Guatemala) were launched in November 2001. A decision was taken in 2010 to pursue a free trade agreement with Honduras separately and negotiations concluded successfully in 2011. Stakeholders were kept informed of developments throughout the negotiations, including on issues concerning rules of origin. A free trade agreement with Honduras is supported by a broad cross-section of Canadian business stakeholders.
These regulations and orders are necessary to fulfill Canada’s commitments under the CHFTA. The regulations link the preferential tariff treatment provided for under the CHFTA, and implemented in the Customs Tariff by the Canada — Honduras Economic Growth and Prosperity Act, with the rules of origin necessary to determine whether the goods qualify for preferential tariff treatment. The orders are necessary to set out the annual quantities for the tariff rate quota and tariff preference levels provided for in the CHFTA and implemented in the Customs Tariff by the Canada — Honduras Economic Growth and Prosperity Act.
In 2013, bilateral merchandise trade between Canada and Honduras totalled $279 million, with Canadian exports accounting for $44 million and imports totalling $235 million.
When the free trade agreement is fully implemented, it is estimated that annual duties foregone by the Government would be approximately $15 million based on current trade patterns. These duties represent a benefit, in the form of lower customs duties to be paid by Canadian importers of Honduras-originating products. With the removal of tariffs in Canada, increased imports from Honduras could be expected, thus potentially leading to enhanced customs duty savings for Canadian importers. Moreover, the removal of tariffs in the Honduran market should help Canadian exporters further penetrate that market, potentially leading to increased exports. Reduction of Honduran tariffs on Canadian exports would help make Canadian goods more competitive in a range of sectors, including on frozen potato products, crude vegetable oils, beef and beef products, most pork products, fertilizers, automotive goods, chemicals and pharmaceuticals.
Canada has already implemented similar regulations and orders for purposes of its other bilateral and regional free trade agreements (FTAs), including the North American Free Trade Agreement, the Canada-Israel FTA, the Canada-Chile FTA, the Canada-Costa Rica FTA, the Canada-European Free Trade Association FTA, the Canada-Peru FTA, the Canada-Colombia FTA, the Canada-Jordan FTA and the Canada-Panama FTA.
Implementation, enforcement and service standards
The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of these regulations and orders in the normal course of its administration of customs and tariff-related legislation and regulations. As is the case of previous free trade agreements, the CBSA will update its systems to account for the implementation in Canada of the CHFTA and will inform importers of all relevant CHFTA-related issues pertaining to these regulations and orders.
International Trade Policy Division
Department of Finance