Most-Favoured-Nation Tariff Withdrawal Order (2022-2): SOR/2022-209
Canada Gazette, Part II, Volume 156, Number 22
SOR/2022-209 October 7, 2022
P.C. 2022-1089 October 7, 2022
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Most-Favoured-Nation Tariff Withdrawal Order (2022-2) under paragraphs 31(1)(a)footnote a and (b)footnote a of the Customs Tariff footnote b.
Most-Favoured-Nation Tariff Withdrawal Order (2022-2)
1 The following definitions apply in this Order.
- goods that originate in Belarus
- means goods that are eligible to be marked as goods of Belarus in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (Non-CUSMA Countries) Regulations. (marchandises originaires du Bélarus)
- goods that originate in Russia
- means goods that are eligible to be marked as goods of Russia in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (Non-CUSMA Countries) Regulations. (marchandises originaires de la Russie)
Extension of Benefit
2 Entitlement to the benefit of the Most-Favoured-Nation Tariff is extended in respect of goods that originate in Belarus and goods that originate in Russia.
Withdrawal of Benefit
3 Entitlement to the benefit of the Most-Favoured-Nation Tariff is withdrawn in respect of goods that originate in Belarus and goods that originate in Russia.
4 Section 3 does not apply to goods of tariff item No. 2844.43.00.
Amendments to the Schedule to the Customs Tariff
5 The List of Countries and Applicable Tariff Treatments set out in the schedule to the Customs Tariff footnote b is amended by adding the symbol “X” in the column under the heading “MFN” opposite “Belarus” and “Russia” in the column under the heading “Country Name”.
6 The List of Countries and Applicable Tariff Treatments set out in the schedule to the Customs Tariff is amended by deleting the symbol “X” in the column under the heading “MFN” opposite “Belarus” and “Russia” in the column under the heading “Country Name”.
7 The Most-Favoured-Nation Tariff Withdrawal Order (2022-1) footnote 1 is repealed.
Coming into Force
8 (1) Subject to subsection (2), this Order comes into force at 11:59:59 p.m. Eastern Daylight Time on the day on which it is registered.
(2) Sections 3, 4 and 6 come into force at 00:00:00 a.m. Eastern Daylight Time on the day after the day on which this Order is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
The Russian Federation, with support from Belarus, continues to violate the sovereignty and territorial integrity of Ukraine. Since Canada withdrew eligibility for Most-Favoured-Nation (MFN) Tariff treatment from Russian and Belarussian goods beginning on March 2, 2022, it has become apparent that a critical medical good sourced from Russia (cobalt-60) cannot be sourced elsewhere in the short or medium term.
On February 24, 2022, Russian military forces invaded the sovereign country of Ukraine, including through the territory of Belarus with the permission of that country’s government. From the beginning of the crisis, Canada and the international community have been calling on Russia to de-escalate, pursue diplomatic channels, and demonstrate transparency in military activities.
In close coordination with its allies and partners, the Government of Canada responded with a broad range of trade measures, including the withdrawal of eligibility for MFN Tariff treatment under section 31 of the Customs Tariff for goods of Russian and Belarussian origin, resulting in the application of the General Tariff, at a rate of 35%, to virtually all goods since March 2, 2022.
The policy rationale for the MFN withdrawal, which remains valid due to the ongoing conflict in Ukraine, is to encourage diversification of Canadian import sourcing and supply chains away from Russia and Belarus, either toward domestic or other foreign sources. Between the MFN withdrawal and other measures, including the Government’s ban on Russian oil imports, imports from these two countries have fallen by approximately 90% in July 2022, compared to the same time period in 2021.
The Government of Canada has heard from several stakeholder groups about the impact of the MFN withdrawal on their import sourcing and operations. In the case of one product, the isotope cobalt-60, imports from Russia are necessary to meet Canadian demand for this good, which is widely used in the sterilization of medical products and equipment with limited alternative suppliers. As a result, the Government of Canada is repealing the current Most-Favoured-Nation Tariff Withdrawal Order (2022-1) and simultaneously making the new Most-Favoured-Nation Tariff Withdrawal Order (2022-2), which excludes cobalt-60 from the 35% tariff. The result is to reinstate the MFN Tariff treatment for these imports.
The only other country subject to the General Tariff is North Korea.
The objectives of this new Order are to
- avoid undue costs for the import of a critical input for medical goods that have health and safety implications;
- continue to encourage Canadian import sourcing and supply chains to move away from Russia and Belarus; and
- continue to impose costs on Russia and Belarus for their unprovoked and unjustifiable invasion of Ukraine.
Repealing the Most-Favoured-Nation Tariff Withdrawal Order (2022-1) terminates the current instrument that withdrew MFN Tariff preferences from Russian and Belarussian originating goods on March 2, 2022, which resulted in a 35% tariff applicable to virtually all goods, including cobalt-60.
Pursuant to paragraph 31(1)(b) of the Customs Tariff, the new Most-Favoured-Nation Tariff Withdrawal Order (2022-2) withdraws eligibility for the MFN Tariff from goods originating in Russia and Belarus, but exempts goods of tariff item No. 2844.43.00. The withdrawal of MFN Tariff treatment results in the application of the General Tariff of 35% to Russian and Belarussian goods, with the exception of the tariff item that contains certain radioactive compounds, elements and isotopes, among them cobalt-60. Goods classified under this tariff item would be subject to the MFN Tariff treatment.
An order made under paragraph 31(1)(b) of the Customs Tariff will cease to have effect 180 days after it comes into force, unless it is approved by a resolution adopted by both Houses of Parliament.
Targeted consultations were undertaken with interested stakeholders who may have been affected by the implementation of the General Tariff on Russian and Belarussian goods. It is the Government’s intention to continue holding consultations in respect of the new measure as needed, and to seek parliamentary approval in the event that the measure would need to be effective for a period that is longer than 180 days.
For these same reasons, and given the upcoming expiry of the current Most-Favoured-Nation Tariff Withdrawal Order (2022-1), the new Order was granted an exemption from the requirement to prepublish in the Canada Gazette, Part I.
Modern treaty obligations and Indigenous engagement and consultation
The new Order is not expected to impact potential or established Aboriginal or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982.
Making an Order in Council under paragraph 31(1)(b) of the Customs Tariff is the most appropriate mechanism, as it was created to provide the ability to remove eligibility for the MFN Tariff, and paragraph 31(2)(c) provides the authority for the Governor in Council to partially withdraw MFN Tariff treatment.
Benefits and costs
Maintaining the withdrawal of eligibility for the MFN Tariff results in a higher import tariff of 35% continuing to apply to virtually all Russian and Belarussian goods. The average MFN Tariff rate was 2.7% based on actual trade prior to March 2022. The continuation of MFN withdrawal will maintain the higher cost of importing goods from Russia and Belarus, causing importers to move towards alternative sources and substantially reducing imports from these two countries over time, as has already been shown in the short term.
The exclusion of cobalt-60 and other radioactive chemicals in tariff item No. 2844.43.00 is designed to allow these imports to benefit from MFN Tariff treatment, given that applying the General Tariff to these goods would not meet the intended objective of inciting alternative sourcing, but would instead result in increased costs. Based on annual average import values between 2019 and 2021, goods under tariff item No. 2844.43.00 accounted for $8.1 million of Canada’s total annual average imports of $1.8 billion from Russia and Belarus. Assuming this trade volume is unchanged, the exclusion of this tariff item from the General Tariff would reduce total tariff revenue by $2.8 million on an annual basis, with corresponding benefits as lower import costs for Canadian importers of these products. Cobalt-60 is limited in supply, with few substitute products available.
Small business lens
The new Order does not make changes to the administrative requirements related to the importing and exporting of goods, including the required customs forms. Rather, it changes the scope of the customs duty applicable to goods of Russia and Belarus under the Most-Favoured-Nation Tariff Withdrawal Order (2022-1) to exclude critical goods for which alternative sourcing is not available in the short to medium term. Accordingly, there is no incremental change to the level of administrative burden or compliance costs currently imposed on businesses, including small businesses, as a result of implementing this new Order.
The one-for-one rule does not apply, as there is no incremental change in administrative burden on business. The new Order repeals and replaces an existing order, which results in no net increase or decrease in regulatory titles. The new Order does not make changes to processes for the importing and exporting of goods, including the required customs forms. Therefore, no increase or decrease in the level of administrative burden imposed on businesses is anticipated.
Regulatory cooperation and alignment
While there is no regulatory cooperation component to this new Order, the exclusion of critical medical goods aligns with the approach taken by other like-minded partners, including the United States, in excluding such goods from similar measures withdrawing tariff preferences.
Strategic environmental assessment
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for this new Order.
Implementation, compliance and enforcement, and service standards
The current Order will be repealed and the new Order will come into force upon their simultaneous registration. The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of the new Order in the normal course of its administration of customs and tariff-related legislation and regulations. The CBSA will update its systems to account for this new Order and will inform importers through public materials.
Trade and Tariff Policy
International Trade Policy Division
Department of Finance